<PAGE>
As filed with the Securities and Exchange Commission on June 30, 1998
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Harris Financial, Inc.
----------------------
(Exact name of registrant as
specified in its charter)
Pennsylvania 23-2889833
-------------------------- ---------------------------
(State of Incorporation (I.R.S. Employer
or Organization) Identification Number)
235 North Second Street
P.O. Box 1711
Harrisburg, Pennsylvania 17105
(717) 236-4041
--------------------------------------------------
(Address, including ZIP Code, and telephone number
including area code, of registrants' principal
executive offices)
Charles C. Pearson, Jr.
President and Chief Executive Officer
Harris Financial, Inc.
235 North Second Street
P.O. Box 1711
Harrisburg, Pennsylvania 17105
(717) 236-4041
------------------------------
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
Copies to:
Kenneth R. Lehman, Esq.
Ned Quint, Esq.
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
(202) 274-2000
- ---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC. As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box [_].
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box [x].
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering [_].
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [_].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
Proposed Proposed
maximum maximum Amount of
Title of each class of security Amount to offering price aggregate registration
to be registered be registered per share offering price fee
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.10 per share 2,300,000 $26.00 $59,800,000 $17,641
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amount of registration fee is calculated pursuant to Rule 457(o) under the
Securities Act of 1933.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
PROSPECTUS
HARRIS FINANCIAL, INC.
2,000,000 Shares of Common Stock
Harris Financial, Inc. (the "Company") a Pennsylvania corporation, which
owns 100% of the common stock of Harris Savings Bank ("Bank"), a Pennsylvania-
chartered savings bank headquartered in Harrisburg, Pennsylvania, is offering
2,000,000 shares of its common stock, par value $.01 per share (the "Common
Stock") for a purchase price of between $_______ and $_________ (the "Offering
Price Range"). The Company is a majority-owned subsidiary of Harris Financial,
MHC (the "Mutual Company"), a Pennsylvania-chartered mutual holding company,
which as of May 31, 1998, owned 25,500,000 shares, or approximately 75.1%, of
the 33,963,450 outstanding shares of Common Stock. At the conclusion of the
Offering, the Mutual Company will contribute to the Company 2,000,000 shares of
Common Stock, and the total number of shares of Common Stock owned by the Mutual
Company will decrease to 23,500,000 shares, or 69.2% of the Company's
outstanding shares as of May 31, 1998. The Company will cancel the contributed
shares, and in the Offering will issue 2,000,000 shares of authorized but
unissued Common Stock. Accordingly, the Offering will not result in a change in
the number of issued and outstanding shares of Common Stock. At the conclusion
of the Offering, in the sole discretion of the Company, the total number of
shares sold in the Offering (and contributed to the Company by the Mutual
Company) may be increased by up to 15%, whether shares are sold at the minimum,
mid-point or maximum of the Offering Price Range.
The shares are being offered pursuant to the Company's Stock Issuance Plan,
which provides that non-transferable rights to subscribe for Common Stock in a
subscription offering (the "Subscription Offering") have been granted, in the
following order of priority, to: (i) Eligible Account Holders, which includes
all depositors of the Bank with aggregate account balances of $50 or more as of
May 31, 1997 (the "Eligibility Record Date"); (ii) the Bank's employee stock
ownership plan and related trust (the "ESOP") in an amount up to 2% of the
shares of Common Stock to be sold in the Offering (as defined below); and (iii)
Supplemental Eligible Account Holders, which includes all depositors of the Bank
with aggregate account balances of $50 or more as of June 30, 1998 (the
"Supplemental Eligibility Record Date") who are not Eligible Account Holders.
Subscription rights are nontransferable. Persons found to be transferring
subscription rights will be subject to the forfeiture of such rights and
possible further sanctions and penalties. Shares of Common Stock for which
subscriptions are not accepted in the Subscription Offering may be offered for
sale in a community offering (the "Community Offering") and/or in a syndicated
offering to certain members of the general public. The Community Offering and/or
syndicated offering, if any, may commence at any time after the commencement of
the Subscription Offering. The Company retains the right, in its sole
discretion, to accept or reject any order in the Community Offering. The
Subscription Offering, Community Offering and syndicated offering are referred
to collectively as the "Offering."
The minimum purchase is $500 of Common Stock. Except for the ESOP, no
Eligible Account Holder or Supplemental Eligible Account Holder may in their
capacities as such purchase in the Subscription Offering more than $250,000 of
Common Stock, and no person together with associates of and persons acting in
concert with such person may purchase in all categories of the Offering more
than $500,000 of Common Stock; provided, however, that the maximum purchase
limitations may be increased or decreased at the sole discretion of the Company.
See "The Offering--Subscription Offering and Subscription Rights," "--Community
Offering" and "--Limitations on Common Stock Purchases."
The Subscription Offering and Community Offering will terminate at 10:00
a.m., Pennsylvania time, on _______________, 1998 unless either or both are
extended by the Company (as extended, the "Expiration Date"). The Company is not
required to give subscribers notice of any such extension. The Community
Offering must be completed within 45 days after the expiration of the
Subscription Offering unless extended by the Company. Orders submitted are
irrevocable; provided that all subscribers will have their funds returned
promptly, with interest, and all withdrawal authorizations will be canceled if
the Offering is not completed within 45 days after the expiration of the
Subscription Offering, unless such period has been extended. See "The Offering--
Subscription Offering and Subscription Rights" and "--Procedure for Purchasing
Shares in Subscription and Community Offerings."
<PAGE>
The Company has retained Ryan, Beck & Co., Inc. ("Ryan Beck"), a registered
broker-dealer, to consult with and advise the Company in connection with the
Offering. Ryan Beck has agreed to use its best efforts to assist the Company in
the solicitation of subscriptions for shares of Common Stock in the Offering.
Ryan Beck is not obligated to take or purchase any shares of Common Stock in the
Offering. (See "The Offering--Plan of Distribution and Selling Commissions."
The Common Stock is traded on the Nasdaq National Market under the symbol
"HARS." On _______________, the last reported sale price of the Common Stock was
______________ per share and the closing bid and asked prices were $______ and
$________ per share, respectively.
CALL THE STOCK INFORMATION CENTER AT (717) ________________ IF YOU HAVE ANY
QUESTIONS.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "SPECIAL CONSIDERATIONS" BEGINNING ON PAGE _________.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE PENNSYLVANIA
DEPARTMENT OF BANKING, OR ANY OTHER FEDERAL OR STATE AGENCY OR ANY STATE
SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, CORPORATION, DEPARTMENT, OFFICE
OR OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. THE COMMON STOCK IS NOT GUARANTEED BY THE COMPANY, THE
MUTUAL COMPANY OR THE BANK. THERE CAN BE NO ASSURANCE THAT THE TRADING PRICE OF
THE COMMON STOCK WILL NOT DECREASE AT ANY TIME.
================================================================================
Estimated Estimated Fees Estimated Net
Purchase Price (1)(2) and Expenses (2)(3) Proceeds (2)(4)
- --------------------------------------------------------------------------------
Minimum Per Share....
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Midpoint Per Share...
- --------------------------------------------------------------------------------
Maximum Per Share....
- --------------------------------------------------------------------------------
Minimum Total........
- --------------------------------------------------------------------------------
Midpoint Total.......
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Maximum Total........
================================================================================
(1) Determined by the Board of Directors in consultation with Ryan Beck. Based
on the issuance of 2,000,000 shares at a price of __________ per share to
_________ per share.
(2) The total number of shares sold in the Offering (and contributed to the
Company by the Mutual Company) may be increased by up to 15%.
(3) Consists of the estimated costs to the Company of the Offering, including
estimated expenses of approximately $________________, and marketing and
advisory fees to be paid to Ryan Beck of $_________________.
(4) Actual net proceeds may vary substantially from estimated amounts. Includes
the purchase of shares of Common Stock by the ESOP which is intended to be
funded by a loan to the ESOP from the Company or from a third party, which
will be deducted from the Company's stockholders' equity. See "Use of
Proceeds" and "Pro Forma Data."
The date of this Prospectus is ________________, 1998
RYAN, BECK & CO., INC.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act of 1934 (the "Exchange Act") and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains an Internet web sight that contains reports,
proxy and information statements and other information regarding issuers who
file electronically with the Commission. The address of that sight is
http://www.sec.gov.
- -------------------
Prior to the completion of the organization of the Company as the Bank's
holding company, the Bank was subject to the information, reporting and proxy
statement requirements of the Exchange Act and, in accordance therewith and with
the rules and regulations of the FDIC, filed reports, proxy statements and other
information with the Federal Deposit Insurance Corporation (the "FDIC"). Copies
of such materials may be obtained at prescribed rates from the FDIC's
Registration, Disclosure and Operations Unit, 550 17th Street, N.W., Washington,
D.C. The statements contained herein as to the contents of any contract or other
document filed as an exhibit hereto are of necessary brief descriptions thereof
and are not necessarily complete. Each such statement is qualified by reference
to such contract or document.
The Company has filed with the Commission a registration statement (the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act. As permitted by the rules and regulations of the SEC, this
Prospectus does not contain all of the information set forth in the Registration
Statement. In addition, certain documents filed by the Company with the
Commission have been incorporated in this Prospectus by reference. See
"Incorporation of Certain Documents by Reference." For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement, including exhibits thereto and the documents
incorporated herein by reference. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission or incorporated by reference herein are not
necessarily complete, and, in each instance, reference is made to the copy of
such document so filed for a more complete description of the matters involved.
Each such statement is qualified in its entirety by such reference. The
Registration Statement may be inspected without charge at the principal office
of the Commission in Washington, D.C., and copies of all or part of it may be
obtained from the Commission upon the payment of prescribed rates.
The Company will provide a copy of the Stock Issuance Plan and material
incorporated by reference into the Prospectus, without charge, to any person to
whom this Prospectus is delivered, on the written or oral request of any such
person. Such requests, in writing or by telephone, should be directed to: James
L. Durrell, Executive Vice President and Chief Financial Officer, Harris
Financial, Inc., 235 North Second Street, Harrisburg, Pennsylvania 17101, (717)
236-4041. In addition, the Plan may be inspected at the offices of the Bank.
3
<PAGE>
SUMMARY
The following summary does not purport to be complete, and is qualified in
its entirety by the more detailed information contained elsewhere in the
Prospectus or in the documents incorporated by reference.
Harris Financial, Inc. The Company is a Pennsylvania corporation that was
formed to become the stock holding company of the Bank
in a transaction (the "Two-Tier Reorganization") that
was completed in September 1997. In the Two-Tier
Reorganization, each share of the Bank's common stock
was converted into and became a share of Common Stock of
the Company, and the Bank became a wholly-owned
subsidiary of the Company. The Mutual Company, which
owned a majority of the Bank's outstanding shares of
common stock immediately prior to completion of the Two-
Tier Reorganization, became the owner of the same
percentage of the outstanding shares of Common Stock of
the Company immediately following the completion of the
Two-Tier Reorganization. As of the date hereof, the sole
activity of the Company is the ownership of all of the
issued and outstanding common stock of the Bank. At
March 31, 1998, the Company had total consolidated
assets of $2.3 billion, total deposits of $1.1 billion
and shareholders' equity of $183.8 million.
Harris Savings Bank The Bank is a Pennsylvania-chartered stock savings bank
headquartered in Harrisburg, Pennsylvania. The Bank is a
community-oriented institution offering traditional
deposit and loan products. The Bank's mutual savings and
loan predecessor was founded in 1886, and converted to a
state-chartered savings bank in 1991. The Bank in its
current stock form was established in January 1994, as a
result of the reorganization (the "Reorganization") of
the Bank's mutual predecessor into a mutual holding
company structure. At the time of the Reorganization,
the Bank issued a majority of its to-be outstanding
shares of common stock to the Mutual Company (which was
formed in connection with the Reorganization) and a
minority of its to-be outstanding shares to stockholders
other than the Mutual Company ("Minority Stockholders").
Special Considerations Attention should be given to the matters discussed under
"Special Considerations."
Use of Proceeds Although the actual net proceeds from the sale of the
Common Stock cannot be determined until the Offering is
completed, it is presently anticipated that the net
proceeds will be between $______________ and
$____________ million, based on the assumptions set
forth in "Pro Forma Data." The net proceeds of the
Offering will be initially invested in federal funds and
investment grade, short-term marketable securities,
and/or used for general corporate purposes.
Dividend Policy The Bank or the Company has paid quarterly cash
dividends every quarter since the completion of the
Reorganization and minority stock issuance in January
1994, and it is the current policy of the Company to pay
a quarterly cash dividend of $.055 per share of Common
Stock. During 1997, the Bank and/or the Company paid
cash dividends totaling $.1999 (as adjusted for the
Company's November 18, 1997 three-for-one stock split)
per share of Common Stock. The Company's ability to pay
dividends will depend largely on its receipt of the
Offering proceeds and cash dividends from the Bank.
Under Pennsylvania law, the Bank is generally permitted
to pay dividends out of accumulated net earnings if the
Bank's surplus would not
4
<PAGE>
be reduced by the payment of such dividend
Pennsylvania law requires the Bank to maintain
surplus in an amount that is at least equal to
capital. See "Dividend Policy."
Dividends paid by the Company will be determined by
the Company's Board of Directors and will be based
upon its consolidated financial condition, results
of operations, tax considerations, economic
conditions, regulatory restrictions which affect
the payment of dividends by the Bank to the
Company, business plans and other factors. In
addition, the Company's ability to pay dividends is
subject to limitations under Pennsylvania law, and
regulations of the FRB that require the Company to
maintain minimum levels of capital. There can be no
assurance that dividends will be paid on the Common
Stock or that, if paid, such dividends will not be
reduced or eliminated in the future. The Mutual
Company has waived the right to receive dividends
paid by the Company, although its ability to do so
may be restricted in the future. See "Dividend
Policy."
Market for Common Stock The Common Stock is listed on the Nasdaq National
Market under the symbol "HARS." As of May 31, 1998,
there were 10 registered market makers in the
Common Stock, 3,676 stockholders of record
(excluding the number of persons or entities
holding stock in street name through various
brokerage firms), and 33,963,450 shares
outstanding. As of such date, the Mutual Company
held 25,500,000 shares of Common Stock and Minority
Stockholders held 8,463,450 shares.
The Offering and the Plan The Board of Directors of the Company adopted the
Plan on June 16, 1998. In adopting the Plan, the
Company's Board of Directors determined that the
Plan and the Offering are in the best interest of
the Company's stockholders, and in the best
interests of Minority Stockholders. In ratifying
the Plan, the Mutual Company's Board of Trustees
determined that the Plan is in the best interest of
the Mutual Company and the Bank's depositors. The
Offering will add financial strength to the
consolidated Company, thereby enhancing the value
of the Mutual Company's primary asset. The increase
in the Company's capital will increase the
Company's ability to serve as a source of strength
to the Bank, and the increase in the Company's and
the Bank's capital will provide additional
protection to the Bank's depositors. Certain of the
Bank's depositors will also be given subscription
rights to purchase the Common Stock in the
Offering.
Under the terms of the Plan, at the conclusion of
the Offering, if the Company has accepted
subscriptions for 2,000,000 shares of Common Stock,
the Mutual Company will contribute to the Company
2,000,000 shares of Common Stock owned by the
Mutual Company, which will then be canceled by the
Company. As a result, the number of shares of
Common Stock owned by the Mutual Company will
decrease to 23,500,000 shares, or approximately
69.2% of the 33,963,450 shares of Common Stock
outstanding as of May 31, 1998, from 25,500,000
shares, or approximately 75.1% of the shares of
Common Stock outstanding as of such date. At the
conclusion of the Offering, in the sole discretion
of the Company, the total number of shares sold in
the Offering (and contributed to the Company by the
Mutual Company) may be increased by up to 15%,
whether shares are sold at the minimum, mid-point
or maximum of the Offering Price Range. The total
number of outstanding shares of Common Stock will
not change as a result of the Offering.
5
<PAGE>
Offering Priorities The Plan provides that, subject to certain purchase
limitations, subscription rights to purchase shares
of Common Stock in the Subscription Offering have
been granted to (i) Eligible Account Holders, (ii)
the ESOP, and (iii) Supplemental Eligible Account
Holders. Any shares of Common Stock for which
subscriptions have not been accepted in the
Subscription Offering may, at the sole discretion
of the Board of Directors of the Company, be
offered for sale in a Community Offering. In the
Community Offering, should it be conducted,
unsubscribed shares would be offered directly to
the general public with a preference to Minority
Stockholders as of ________, 1998, and then to
those natural persons residing in the Pennsylvania
counties of Dauphin, Cumberland, York, Lancaster,
and Lebanon, and the Maryland county of Washington
(the "Community"). Additional terms and conditions
may be established at any time prior to the closing
of any Community Offering by the Board of Directors
of the Company.
Purchase Price and Number The Offering will not be consummated unless
of Shares to be Issued subscriptions have been accepted for at least
2,000,000 shares of Common Stock. The Bank is
offering the Common Stock at an Offering Price
Range of $________ to $_________ per share, or an
aggregate range of $____________ million to
$____________ million, as established by the
Company's Board of Directors in consultation with
its financial advisor. All shares of Common Stock
will be sold at the Actual Purchase Price. The
Actual Purchase Price, which is expected to be
within the Offering Price Range, will be determined
based on market and financial considerations. The
Board of Directors has engaged Ryan Beck, which
specializes in bank and thrift securities, to
deliver to the Board of Directors an opinion (the
"Fairness Opinion"), dated as of the consummation
of the Offering, that the pricing of the Common
Stock is fair from a financial point of view to (i)
the Mutual Company and the Bank's depositors, and
(ii) stockholders of the Company including Minority
Stockholders. The Fairness Opinion is not intended
as a recommendation as to the advisability of
purchasing stock. No assurance can be given that
those who purchase shares of Common Stock in the
Offering will be able to sell such shares after the
Offering at or above the Actual Purchase Price. See
"Stock Offering--Stock Pricing, Number of Shares to
be Issued and the Fairness Opinion."
If the Actual Purchase Price is not within the
Offering Price Range and the Company determines to
continue the Offering, subscribers will be offered
the opportunity to modify or withdraw their orders,
and, unless they affirmatively respond within a
designated period of time, their funds will be
returned promptly with interest, and/or their
withdrawal authorizations canceled. If the Company
determines to terminate the Offering, subscribers'
funds will be returned promptly with interest,
and/or their withdrawal authorizations will be
canceled.
Community Offering Any shares of Common Stock for which subscriptions
have not been accepted in the Subscription Offering
may, at the sole discretion of the Board of
Directors of the Company, be offered for sale in a
Community Offering. In the Community Offering,
should it be conducted, unsubscribed shares would
be offered directly to the general public with a
preference first to Minority Stockholders as of
_______, 1998, and then to natural persons residing
in the Community. Additional terms and conditions
may be established at any time prior to the closing
of any Community Offering by the Board of Directors
of the Company. The Community Offering, if any,
shall be for a period of not more than 45 days
unless extended by the Company, and shall commence
concurrently with, during or promptly after the
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<PAGE>
Subscription Offering. The opportunity to subscribe
for shares of Common Stock in the Community
Offering is subject to the right of the Company in
its sole discretion, to accept or reject any such
orders in whole or in part either at the time of
receipt of an order or as soon as practicable
following the Expiration Date.
Purchase Limitations The minimum amount of Common Stock for which any
person may subscribe in the Offering is $500.
Except for the ESOP, no Eligible Account Holder or
Supplemental Eligible Account Holder may in their
capacities as such purchase in the Subscription
Offering more than $250,000 of Common Stock, and no
person together with associates of and persons
acting in concert with such person may purchase in
all categories of the Offering more than $500,000
of Common Stock; provided, however, that the
maximum purchase limitations may be increased or
decreased at the sole discretion of the Company.
Expiration Date for the The Subscription Offering and the Community
Offering Offering will terminate at 10:00 a.m., Pennsylvania
time, on ____________, 1998, unless either or both
are extended by the Company for up to 45 days, or
such additional periods as may be approved by
Pennsylvania Department of Banking (the
"Department") and, if necessary, the FRB (as
extended, the "Expiration Date"). Subscription
rights which have not been exercised prior to the
conclusion of the Subscription Offering will become
void. Orders will not be executed until all shares
of Common Stock have been subscribed for or
otherwise sold. If all shares have not been
subscribed for by the Expiration Date, unless such
period is extended with the consent of the
Department, all funds will be returned promptly to
the subscribers with interest and all withdrawal
authorizations will be canceled. If an extension is
granted, subscribers will be notified of the
extension of time and of any rights of subscribers
to modify or rescind their subscriptions. If the
Offering is terminated, subscribers' funds will be
returned promptly with interest, and/or their
withdrawal authorizations will be canceled.
Procedure for Purchasing To purchase shares in the Subscription Offering and
Shares in the Subscription Community Offering, an executed order form with the
and Community Offering required payment for the total dollar amount of
Common Stock subscribed for, or with appropriate
authorization for withdrawal from savings accounts
including certificates of deposit at the Bank, must
be received by the Company by 10:00 a.m.,
Pennsylvania time on the Expiration Date. Order
forms which are not received by such time or are
executed defectively or are received without full
payment (or appropriate withdrawal instructions)
are not required to be accepted. In addition, an
order submitted on photocopied or facsimile order
forms will not be accepted. The Company has the
right to waive or permit the correction of
incomplete or improperly executed forms, but does
not represent it will do so. Once received, an
executed order form may not be modified, amended or
rescinded without the consent of the Company unless
the Offering has not been completed by
_____________________, 1998, unless such period has
been extended. In order to ensure that Eligible
Account Holders and Supplemental Eligible Account
Holders are properly identified as to their stock
purchase priorities, depositors as of the
Eligibility Record Date and the Supplemental
Eligibility Record Date must list all accounts on
the stock order form giving all names in each
account and the account number.
All subscribers must subscribe for a dollar amount
of Common Stock. The total number of shares that
will be issued to a subscriber will be equal to the
total dollar
7
<PAGE>
amount of the subscription divided by the Actual
Purchase Price per share, subject to the applicable
purchase limitations and allocations in the event
of an oversubscription. Fractional shares will not
be issued; instead, the Company will refund any
partial subscriptions that are insufficient to
purchase a whole share.
Payment for subscriptions must accompany an order
form and may be made (i) by check or money order,
or (ii) by authorization of withdrawal from savings
accounts or certificates of deposit maintained with
the Bank. Interest will be paid on payments made by
check or money order at the Bank's passbook rate of
interest from the date payment is received until
the completion or termination of the Offering. If
payment is made by authorization of withdrawal, the
funds authorized to be withdrawn from a deposit
account will continue to accrue interest at the
contractual rates until completion or termination
of the Offering, but a hold will be placed on such
funds, thereby making them unavailable to the
depositor.
Benefits to Management The Bank's full-time employees participate in the
from the Offering Bank's ESOP which intends to purchase 40,000 shares
in the Offering. In addition, following the
completion of the Offering the Company intends to
award to employees, officers and directors at no
cost to such persons: (i) a number of shares of
restricted stock equal to 4% of the shares sold in
the Offering and (ii) options to purchase a number
of shares of Common Stock equal to 10% of the
shares sold in the Offering. Such awards will be
made pursuant to the Company's existing stock
benefit plans or new stock benefit plans
implemented by the Company. No such awards will be
made for at least six months after completion of
the Offering, and the Company will obtain
stockholder approval of any such award made within
one year of the completion of the Offering.
Restrictions on Transfer of Subscription rights are nontransferable. Persons
Subscription Rights and receiving subscription rights may not transfer them
Shares or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the
subscription rights issued under the Plan or, prior
to the completion of the Offering, the shares of
Common Stock to be issued upon their exercise. Such
rights may be exercised only by the person to whom
they are granted and only for his account. Each
person exercising such subscription rights will be
required to certify that he is purchasing shares
solely for his own account and that he has no
agreement or understanding regarding the sale or
transfer of such shares. In addition, persons may
not offer or make an announcement of an offer or
intent to make an offer to purchase such
subscription rights or shares of Common Stock prior
to the completion of the Offering. The Company will
pursue any and all legal and equitable remedies in
the event management becomes aware of the transfer
of subscription rights and will not honor orders
known by them to involve the transfer of such
rights.
8
<PAGE>
SPECIAL CONSIDERATIONS
The following special considerations, in addition to the information
presented in this Prospectus, should be considered by prospective investors in
deciding whether to purchase the Common Stock offered hereby.
Potential Adverse Impact of Changes in Interest Rates
Because the Company's primary asset consists of 100% of the outstanding
shares of the Bank's common stock, the Company's profitability depends primarily
on the profitability of the Bank. The Bank's profitability, like that of most
financial institutions, depends to a large extent upon its net interest income,
which is the difference between interest income on interest-earning assets, such
as loans and investments, and interest expense on interest-bearing liabilities,
such as deposits and other borrowings. The Bank's net interest income, for
example, could be adversely affected if changes in market interest rates
resulted in the cost of interest-bearing liabilities increasing faster than any
increase in the yield on the Bank's interest-earning assets. The Bank, like
other financial institutions, uses a methodology that measures its exposure to
interest rate risk based on its interest rate sensitivity gap. A gap is
considered positive when the amount of interest sensitive assets exceeds the
amount of interest sensitive liabilities. A gap is considered negative when the
amount of interest sensitive liabilities exceeds the amount of interest
sensitive assets. At March 31, 1998, the Bank's cumulative one-year interest
sensitivity gap (the difference, based on certain assumptions, between the
amount of interest-earning assets anticipated by the Bank to mature or reprice
within one year and the amount of interest-bearing liabilities anticipated by
the Bank, based on certain assumptions, to mature or reprice within one year) as
a percentage of total assets was 4%. As a result, based upon the methodology
used by the Bank, the yield on interest-earning assets of the Bank may adjust to
changes in interest rates more rapidly than the cost of the Bank's interest-
bearing liabilities. Consequently, the Bank's net interest income could be
adversely affected during periods of rapidly declining interest rates. There can
be no assurance, however, that the changes in the Bank's actual net interest
income will be consistent with those projected in the methodology. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the accompanying 1997 Annual Report for further discussion of the
Bank's exposure to interest rate risk, as well as any shortcomings in the
methodology. Changes in interest rates also may impact the volume of mortgage
loan originations as well as the value of the Bank's loan servicing rights,
investments in mortgage-backed securities, investment securities and other
interest-earning assets.
Extensive Governmental Regulation of the Financial Institution Industry
The Bank is subject to extensive regulation by the FDIC and is periodically
examined by the FDIC to test compliance with various regulatory requirements.
Such supervision and regulation is intended primarily for the protection of
depositors and the deposit insurance fund, and not for the maximization of
shareholder value. The lending and savings activities of the Bank are also
subject to various "consumer protection" laws that impose significant liability
for noncompliance, whether intentional or not. Accordingly, the operations and
profitability of financial institutions and their holding companies are
significantly affected by legislation and the policies of the various federal
banking agencies. Since 1989, various legislation has been enacted that imposes
increased regulatory restrictions and obligations on the operations of financial
institutions and mandates the development of regulations designed to empower
regulators to take prompt corrective action with respect to institutions that
fall below certain capital standards.
The Possible Decline in the Market for Common Stock after the Offering
Because the Actual Purchase Price per share may be less than the market
price of Common Stock on the date the Offering is completed, some purchasers in
the Offering may be inclined to immediately sell shares of Common Stock,
purchased at the discounted price, in order to attempt to realize any such
profit. Any such sales, depending on the volume and timing, could cause the
market price of Common Stock to decline. Purchasers should consider these
possibilities in determining whether to purchase Common Stock and, the timing of
any sale of Common Stock. The Common Stock is listed on the Nasdaq National
Market. See "Market Information" and "The Offering--Stock Pricing and Number of
Shares to be Issued."
9
<PAGE>
Inability to Resell the Common Stock Until the Issuance and Receipt of
Certificates
Until certificates for Common Stock are delivered to purchasers, purchasers
may not be able to sell the shares of Common Stock for which they subscribe.
Accordingly, during such period subscribers will bear the risk of any decline in
the market price in the Common Stock. The Company intends to mail the
certificates representing Common Stock issued in the Offering promptly following
completion of the Offering. See "The Offering--Procedure for Purchasing Shares
in Subscription and Community Offering."
The Highly Competitive Environment in which the Company Operates
The Bank faces significant competition in its market area both in
attracting deposits and in originating loans. The Bank faces direct competition
from a significant number of financial institutions, as well as other providers
of financial services, operating in its market area, many with a state-wide or
regional presence, and, in some cases, a national presence. This competition
arises from commercial banks, savings institutions, mortgage banking companies,
credit unions, brokerage firms, mutual funds companies and other providers of
financial services, many of which are significantly larger than the Bank, and
therefore have greater financial and marketing resources than those of the Bank.
Antitakeover Provisions and the Mutual Holding Company Structure
Because the Mutual Company is required by Pennsylvania law to own a
majority of the outstanding shares of Common Stock for so long as the Mutual
Company remains in existence, an acquisition of the Company could generally not
be consummated without the approval of the Mutual Company, the Trustees of which
are also the Directors of the Company. In addition, regulatory authorities are
unlikely to approve an acquisition of the Company by another institution while
the Bank and the Company are in the mutual holding company structure. Moreover,
the Certificate of Incorporation and the Bylaws of the Bank and the Company
include certain provisions which may be considered to be antitakeover in nature
because they may have the effect of discouraging or making more difficult the
acquisition of control of the Bank by means of an unsolicited tender or exchange
offer, proxy contest or similar transaction.
10
<PAGE>
HARRIS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OTHER DATA
Set forth below are selected consolidated financial and other data of the
Company. For additional information about the Company, please refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Bank and related
notes included in the 1997 Annual Report and the Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1998, which accompany this Prospectus.
Because the Company had insignificant assets and operations until completion of
the Two-Tier Reorganization on September 17, 1997, information as of and for
periods ending prior to such time is presented for the Bank.
<TABLE>
<CAPTION>
At At December 31,
March 31, ----------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
Selected Consolidated Financial Condition Data: (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total assets............... $2,260,301 $2,207,059 $1,768,122 $1,255,864 $1,058,088 $1,087,006
Loans receivable, net...... 887,765 890,484 823,916 651,605 574,794 566,550
Loans held-for-sale, net... 20,421 14,886 9,053 0 0 0
Marketable securities...... 1,209,273 1,199,194 828,910 524,932 409,123 424,181
Deposits................... 1,139,174 1,146,238 1,173,423 1,073,710 910,576 937,903
Escrow..................... 9,730 8,552 8,203 4,649 5,116 11,643
Advances from FHLB-
Pittsburgh and other
borrowed funds............ 902,383 852,988 419,146 17,200 0 0
Other borrowings........... 495 990 1,485 1,980 2,475 0
Stockholders' equity(1).... 183,758 179,034 152,752 151,459 135,036 NA
<CAPTION>
Three Months Ended Years Ended December 31,
March 31, ----------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
Selected Consolidated Operating Data: (In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $ 40,407 $ 31,454 $ 141,067 $ 107,988 $ 80,625 $ 73,932 $ 81,020
Interest expense........... 26,309 19,921 93,085 67,326 47,696 38,241 41,409
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income...... 14,098 11,533 47,982 40,662 32,929 35,691 39,611
Provision for loan
losses................. 830 152 610 1,957 0 0 800
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............. 13,268 11,381 47,372 38,705 32,929 35,691 38,811
Noninterest income......... 4,928 3,275 14,559 3,996 2,564 2,503 4,563
Noninterest expense........ 9,823 7,657 35,848 42,187 20,776 20,793 17,966
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes
and cumulative effect of
accounting changes....... 8,373 6,999 26,083 514 14,717 17,401 25,408
Income taxes............... 2,624 2,290 8,312 (517) 5,503 7,348 9,170
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income after taxes and
before cumulative effect
of accounting changes... 5,749 4,709 17,771 1,031 9,214 10,053 16,238
Cumulative effect of
accounting changes........ 0 0 0 0 0 0 1,420
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................. $ 5,749 $ 4,709 $ 17,771 $ 1,031 $ 9,214 $ 10,053 $ 17,658
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
At or for the
Three Months
Ended At of for the Year Ended December 31,
March 31, ----------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
Key Financial Ratios and Other Data:
<S> <C> <C> <C> <C> <C> <C>
Financial Ratios:
Return on average assets... 1.01% 0.88% 0.07% 0.81% 0.93% 1.67%
Return on average equity... 12.58% 10.73% 0.68% 6.34% 7.59% 17.75%
Average equity to average
assets.................... 8.04% 8.21% 9.88% 12.83% 12.27% 9.42%
Per Share Data (2):
Combined pre- and
post-Reorganization
earnings per share........ $ .17 $ 0.53 $ 0.03 $ 0.28 $ 0.31 NA
Basic earnings per share... .17 0.53 0.03 0.28 0.28 NA
Diluted earnings per share. .17 0.52 0.03 0.28 0.28 NA
Dividends per share........ .055 0.20 0.19 0.17 0.09 NA
Book value per share....... 5.41 5.29 4.54 4.50 4.03 NA
Dividend payout ratio...... 7.60% 8.67% 141.90% 13.70% 6.44% NA
</TABLE>
- -------------------
(1) The Bank's retained earnings as of December 31, 1993, prior to the
Reorganization, were $107,886,000. Retained earnings are partially
restricted in connection with regulation related to the insurance of savings
accounts which require the Company to maintain certain statutory reserves.
(2) All per share values have been adjusted to reflect the 1997 three-for-one
stock split.
11
<PAGE>
HARRIS FINANCIAL, INC.
General
The Company is a Pennsylvania corporation that was formed to become the
stock holding company of the Bank in the Two-Tier Reorganization, which was
completed in September 1997. In the Two-Tier Reorganization, each share of the
Bank's common stock was converted into and became a share of Common Stock of the
Company, and the Bank became a wholly-owned subsidiary of the Company. The
Mutual Company, which owned a majority of the Bank's outstanding shares of
common stock immediately prior to completion of the Two-Tier Reorganization, and
stockholders other than the Mutual Company, which owned a minority of such
shares, became the owners of the same percentage of the outstanding shares of
Common Stock of the Company immediately following the completion of the Two-Tier
Reorganization. As of the date hereof, the primary activity of the Company is
the ownership of all of the issued and outstanding common stock of the Bank.
The Company through the Bank, presently operates 33 full service offices, a
mortgage banking subsidiary, an operations center and a business center and
serves depositors primarily in the five central Pennsylvania counties of
Dauphin, Cumberland, York, Lancaster, and Lebanon and in the northern Maryland
county of Washington. It serves small business borrowers in the same area. The
Bank offers mortgage loans in its market area. The Bank's mortgage banking
subsidiary in Blue Bell, Pennsylvania, offer residential mortgages in
Pennsylvania and four other states, most of which are sold in the secondary
market. The Bank provides manufactured housing loans to borrowers throughout
most of the eastern United States.
The Bank's primary lending activity continues to be the origination of
loans secured by first mortgages on owner-occupied one- to four-family
residences. At March 31, 1998, such loans totaled $538.8 million or 60.4% of
total loans. The Company began originating commercial business loans in 1996 and
its portfolio totaled $108.4 million at March 31, 1998. At March 31, 1998, the
Company had total assets of $2.3 billion, total deposits of $1.1 billion and
stockholders' equity of $183.8 million.
Operating Strategy
Over the last several years, the Bank's operating strategy is to change its
orientation from a traditional savings bank to more closely resemble a full
service commercial bank. In the last two years, management has refined and
accelerated implementation of the strategy, which involves (i) developing a
commercial business lending expertise, (ii) increasing non-interest income
sources and amounts, (iii) developing an incentive-based sales culture in the
branch network and focusing marketing strategies on product management, (iv)
enhancing delivery systems; and (v) expanding the Bank's geographic market area.
Management seeks to implement this business strategy in a controlled manner, in
order to help ensure that the Bank maintains a consistently high asset quality
and strong capital base and preserves its reputation for professional,
community-oriented service.
In order to accomplish the objectives described above, it has been
necessary to acquire staff with the expertise to transition the Bank to a full
service financial institution. It has also been necessary to upgrade the Bank's
computer systems. Management believes that the staff and the technology
infrastructure are now in place and that the necessary initiatives are underway
to allow the Bank to achieve its business goals.
The Bank's strategic initiatives include the following:
. Strengthening the Management Team. In January 1998, Charles Pearson
was named President and CEO of the Company and the Mutual Company.
Most recently, Mr. Pearson served as President and CEO of PNC Bank's
central Pennsylvania region. Prior to that, he was President and CEO
of United Federal Bankcorp, Inc. In April 1998, John Atkinson joined
the Company in the newly-created position of Chief Operating Officer.
He previously served as head of retail banking at PNC Bank
12
<PAGE>
central Pennsylvania region. Additionally, the Bank has augmented its
officer-level staff in the last two years, hiring, among others, loan
officers, a chief information officer, a chief credit officer and a
sales training manager. Management believes that bank mergers in the
Company's market have created opportunities for the Company to
recruit a number of talented, experienced people, including
commercial and consumer loan officers with knowledge about and
contacts within the communities served by the Bank.
. Loan Portfolio Diversification. The Bank has historically focused on
traditional savings bank products and services, and it remains a
strong one- to four-family residential mortgage lender. However, as
part of the transition to a community bank orientation, the
concentration of such loans has declined from 71.5% of the loan
portfolio at December 31, 1995 to 60.4% two years later. During the
same period, commercial business loans increased from .3% to 7.3% of
the loan portfolio. Although commercial lending subjects the Bank to
more credit risk than single family residential loans, commercial
loans are generally originated with higher interest rates and shorter
maturities than residential loans.
The Business Banking Group was established in early 1996 to originate
commercial business loans to small and mid-sized local businesses.
Its experienced lenders have taken advantage of opportunities
presented by recent bank mergers that have resulted in dissatisfied
customers of the acquired banks.
. Increased Non-Interest Income. The Bank has recently expanded its
sources and amounts of fee income in order to reduce its dependence
on net interest income. Service charge and fee income, a primary
contributor to non-interest income, increased nearly 100% from fiscal
1996 to 1997, as a result of the expansion of the ATM network and
promotion of a "High Performance Checking" program. Net loan
servicing income, also a significant component of non-interest
income, increased by 65.1% over the same time period. The Bank
intends to continue to grow its servicing portfolio, through loans
originated by its mortgage banking subsidiary and through purchased
loan servicing. Additionally, the Bank's non-interest income is
expected to benefit to a lesser extent from the expansion/addition of
non-traditional products. For example, the Bank intends to expand its
lines of securities and insurance products and very recently began
offering trust and investment services.
. External Growth. In 1995, the Bank opened its first offices outside
of Pennsylvania through the purchase of two branches in Hagerstown,
Maryland. Recently, efforts have been made to expand the Bank's
presence in that market through a focus on commercial business
lending. In April 1996, First Harrisburg Bancor, Inc. ("First
Harrisburg") was acquired and accounted for on a purchase accounting
basis. First Harrisburg had assets of approximately $277 million at
the time of the acquisition. The Bank expects to target promising new
geographic markets and expand coverage of existing markets, through
de novo branching and loan production offices, branch acquisitions
and acquisitions of financial institutions and financial services
companies. Consolidation of the financial services industry may
present favorable acquisition opportunities.
. Fostering a Sales Culture. A sales training manager was recently
hired to further management's endeavors to leverage the Bank's
extensive branch network by educating personnel about banking
products, training them regarding cross-selling techniques and
rewarding their efforts through an incentive-based compensation
program. The Bank has also begun a product management program to
develop and price products intended for specific customer segments.
. Enhanced Information and Delivery Systems. In 1997, the Bank
replaced much of its core hardware and software with more
sophisticated systems, including a personal computer network. The
upgrade, now substantially completed, is expected to increase
productivity by reducing manual applications,
13
<PAGE>
improving management information and facilitating customer service.
The Bank has recently launched technological enhancements to increase
customer access to banking services. These include corporate cash
management software, an internet web site (loan, and deposit programs
and other information) and telephone voice response banking.
Improvements to these systems are underway, and internet banking will
be introduced shortly. The Bank has also expanded its ATM network in
the last two years to a total of 28, and intends to expand to 40 ATMs
by the end of 1998. Certain branch locations have been or will be
remodeled to improve service.
The Company's principal executive office is located at 235 North Second
Street, Harrisburg, Pennsylvania, and its telephone number at that address is
(717) 236-4041.
REGULATORY CAPITAL COMPLIANCE
At March 31, 1998, the Bank exceeded each of its regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the
FDIC capital standards as of March 31, 1998, on a historical and pro forma basis
assuming the sale on such date of 2,000,000 shares of Common Stock at the
indicated price per share and receipt by the Bank of 50% of the net proceeds.
For purposes of the table below, the amount expected to be borrowed by the ESOP
and the cost of the shares expected to be acquired by the restricted stock plan
are deducted from pro forma regulatory capital. The Federal Reserve Board has
adopted capital adequacy guidelines for bank holding companies (on a
consolidated basis) substantially similar to the FDIC capital requirements for
the Bank. On a pro forma consolidated basis after the Offering, the Company's
pro forma stockholders' equity will continue exceed these requirements.
<TABLE>
<CAPTION>
Pro Forma at March 31, 1998, Based Upon the Sale of 2,000,000 shares
---------------------------------------------------------------------
Historical at Minimum of Midpoint of Maximum of
March 31, 1998 $ Per Share $ Per Share $ Per Share
---------------------- ---------------------- --------------------- --------------------
Percent Percent Percent Percent
of of of of
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
-------- ---------- -------- ---------- -------- ---------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital.................. $183,758 8.1% $ $ $
======== ====== ======== ====== ======== ====== ======== ======
Leverage capital:
Capital level (2)............ $155,882 6.9% $ $ $
Requirement(3)............... 89,755 4.0%
-------- ------ -------- ------ -------- ------ -------- ------
Excess..................... $ 66,127 2.9% $ $ $
======== ====== ======== ====== ======== ====== ======== ======
Risk-based capital:
Tier 1 capital level (2)(4).. $155,882 12.4% $ $ $
Requirement.................. 50,386 4.0%
-------- ------ -------- ------ -------- ------ -------- ------
Excess..................... $105,496 8.4% $ $ $
======== ====== ======== ====== ======== ====== ======== ======
Total capital level (2)(4).. $164,390 13.1% $ $ $
Requirement................. 100,773 8.0%
-------- ------ -------- ------ -------- ------ -------- ------
Excess...................... $ 64,157 5.1% $ $ $
======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
- -----------------
(1) Leverage capital levels are shown as a percentage of tangible assets. Risk-
based capital levels are calculated on the basis of a percentage of risk-
weighted assets.
(2) Pro forma capital levels are calculated assuming that the Company funds the
restricted stock plan to enable the plan to purchase at the assumed price
in the open market a number of shares equal to 4% of the common stock sold
in the Offering and the ESOP purchases 2% of the shares sold in the
Offering.
(3) The current leverage capital requirement is 3% of total adjusted assets for
banks that receive the highest supervisory rating for safety and soundness
and that are not experiencing or anticipating significant growth. The
current leverage capital ratio applicable to all other banks is 4% to 5%.
(4) Assumes net proceeds are invested in assets that carry a risk-weighting
equal to the average risk weighting of the Bank's risk-weighted assets as of
March 31, 1998.
14
<PAGE>
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Offering is completed, it is presently anticipated,
based on the assumptions set forth in "Pro Forma Data" that the net proceeds
from the sale of the Common Stock will range from $_________ million to
$________ million.
The Company will contribute 50% of the net proceeds of the Offering to the
Bank. Such portion of net proceeds received by the Bank from the Company will be
added to the Bank's general funds which the Bank currently intends to utilize
for general corporate purposes, including investments in short- and medium-term
investments. The Bank also intends to use such funds to increase its loan
originations. The Bank may also use such funds for the expansion of its retail
banking franchise, and to expand operations through acquisitions of other
financial institutions, branch offices or financial services businesses. To the
extent that the expected future awards under the Company's existing or new
stock-based benefit programs are not funded with authorized but unissued shares
of Common Stock, the Company or Bank may use net proceeds from the Offering to
fund the purchase of stock to be awarded under such stock-based benefit
programs.
The Company intends to use a portion of the net proceeds it retains to make
a loan directly to the ESOP to enable the ESOP to purchase 40,000 of the shares
sold in the Offering. The remaining net proceeds retained by the Company will be
invested initially in short- and medium-term investments. The net proceeds
retained by the Company may also be used to support the future expansion of
operations through branch acquisitions, the establishment of branch offices and
the acquisition of financial institutions or their assets, or diversification
into other banking related businesses. However, the Company and the Bank have no
current arrangements, understandings or agreements regarding any such
transactions.
Upon completion of the Offering, the Board of Directors of the Company will
have the authority to repurchase stock, subject to statutory and regulatory
requirements. Based upon facts and circumstances following the Offering and
subject to applicable regulatory requirements, the Board of Directors may
determine to repurchase stock in the future. Such facts and circumstances may
include but not be limited to (i) market and economic factors such as the price
at which the stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, and the opportunity to improve the
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock-based benefit plans; and (iii) any other circumstances in
which repurchases would be in the best interests of the Company and its
shareholders. In the event the Company determines to repurchase stock, such
repurchases may be made at market prices which may be in excess of the Actual
Purchase Price in the Offering. To the extent that the Company repurchases stock
at market prices in excess of the per share book value, such repurchases will
have a dilutive effect upon stockholders' equity per share of Common Stock.
15
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the Company
at March 31, 1998, and the pro forma consolidated capitalization of the Company
after giving effect to the Offering, based upon the sale of 2,000,000 shares for
the price per share indicated in the table and the other assumptions set forth
under "Pro Forma Data."
<TABLE>
<CAPTION>
Pro Forma Consolidated
Capitalization Based Upon the
Sale of 2,000,000 Shares
-------------------------------
Minimum Midpoint Maximum
Price of Price of Price of
Historical $ Per $ Per $ Per
Capitalization Share Share Share
-------------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Deposits (1)............... $1,139,174 $ $ $
Other borrowings........... 902,878
---------- --------- --------- ---------
Total deposits and
borrowed funds............ $2,042,052 $ $ $
========== ========= ========= =========
Stockholders' equity:
Preferred Stock, $.01 par
value, 10,000,000
shares authorized; none
to be issued (2)......... $ 0 $ $ $
Common Stock, $.01 par
value per share:
100,000,000 shares
authorized; shares to be
issued as reflected...... 339
Additional paid-in capital
(2)....................... 28,981
Retained earnings (3)...... 154,438
Less:
Common Stock acquired by
ESOP (4)................. 0
Common Stock acquired by
restricted stock plans
(5).................... 0
---------- --------- --------- ---------
Total stockholders'
equity................. $ 183,758 $ $ $
========== ========= ========= =========
Total stockholders' equity
as a percentage of
pro forma total assets.... 8.13% % % %
========== ========= ========= =========
</TABLE>
- -------------------
(1) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Offering. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(2) Reflects the sale of shares in the Offering. Does not include proceeds from
the Offering that the Company intends to lend to the ESOP to enable it to
purchase shares of Common Stock in the Offering. No effect has been given
to the issuance of additional shares of Common Stock pursuant to existing
stock option plans or the stock option awards in an amount equal to 10% of
the number of shares issued in the Offering that the Company intends to make
after the Offering.
(3) The retained earnings of the Company will be substantially restricted after
the Offering. Includes unrealized gains on securities available for sale.
(4) Assumes that 2% of the shares sold in the Offering will be purchased by the
ESOP and that the funds used to acquire the ESOP shares will be borrowed
from the Company. The Common Stock acquired by the ESOP is reflected as a
reduction of stockholders' equity.
(5) Assumes that, subsequent to the Offering, an amount equal to 4% of the
shares of Common Stock sold in the Offering is purchased in the open market
and awarded pursuant to the Company's restricted stock plans. The Common
Stock to be purchased by the restricted stock plans is reflected as a
reduction of stockholders' equity.
MARKET INFORMATION
The Common Stock is listed on the Nasdaq National Market under the symbol
"HARS." As of May 31, 1998, the Company had 10 registered market makers, 3,676
stockholders of record (excluding the number of persons or entities holding
stock in street name through various brokerage firms), and 33,963,450 shares
outstanding. As of such date, the Mutual Company held 25,500,000 shares of
Common Stock and Minority Stockholders held 8,463,450 shares.
16
<PAGE>
The following table sets forth market price and dividend information for the
Common Stock or, prior to the completion of the Two-Tier Reorganization, the
Bank's common stock. Information is presented for each quarter of the previous
two calendar years. All information has been revised to reflect the Bank's
November 18, 1997 three-for-one stock split.
Quarter Ended High Low Dividends
------------- ---- --- ---------
1996
----
March 31 $ 6 48/64 $ 5 59/64 $.0483
June 30 $ 6 16/64 $ 5 $.0483
September 30 $ 5 43/64 $ 4 59/64 $.0483
December 31 $ 6 13/64 $ 5 $.0483
1997
----
March 31 $ 7 37/64 $ 6 5/64 $.0483
June 30 $ 7 11/64 $ 6 3/64 $.0483
September 30 $ 16 27/64 $ 7 $.0483
December 31, 1997 $ 21 1/2 $ 15 43/64 $.0550
1998
----
March 31 $ 27 $ 17 $.0550
June 30 $.0550
The last trade of the Common Stock on June __, 1998 was at a price of
$_______ per share and the closing bid and asked prices were $______ and
$_______, per share, respectively.
DIVIDEND POLICY
General
The Bank, or, since the Two-Tier Reorganization, the Company, has paid
quarterly cash dividends every quarter since the completion of the mutual
holding company reorganization and minority stock issuance in January 1994, and
it is the current policy of the Company to pay a quarterly cash dividend of
$.055 per share. The Company's ability to pay dividends will depend largely on
its receipt of Offering proceeds and cash dividends from the Bank. Under
Pennsylvania law, the Bank is generally permitted to pay dividends out of
accumulated net earnings if the Bank's surplus would not be reduced by the
payment of such dividend. Pennsylvania law requires the Bank to maintain surplus
in an amount that is at least equal to capital.
Dividends paid by the Company will be determined by the Company's Board of
Directors and will be based upon its consolidated financial condition, results
of operations, tax considerations, economic conditions, regulatory restrictions
which affect the payment of dividends by the Bank to the Company, business plans
and other factors. In addition, the Company's ability to pay dividends is
subject to limitations under Pennsylvania law, and regulations of the FRB that
require the Company to maintain certain minimum levels of capital. There can be
no assurance that dividends will be paid on Common Stock or that, if paid, such
dividends will not be reduced or eliminated in the future.
Dividend Waivers by the Mutual Company
The Mutual Company has generally waived the receipt of dividends declared
by the Bank, or, subsequent to the Two-Tier Reorganization, dividends paid by
the Company. The Mutual Company has not been required to obtain approval of the
FRB prior to any such waiver, and through the date hereof has not sought or
received FRB approval of any such waiver. In connection with the FRB and FDIC
approvals of the Bank's acquisition of First Harrisburg Bancor, Inc. and its
wholly owned subsidiary, First Federal Savings and Loan Association of
Harrisburg ("First Federal"), the
17
<PAGE>
Bank and the Mutual Company made several commitments to the FDIC and the FRB
regarding the waiver of dividends by the Mutual Company. These commitments
include the following: (i) Any dividends waived by the Mutual Company shall be
taken into account in any valuation of the Bank and the Mutual Company, and
factored into the calculation used in establishing a fair and reasonable basis
for exchanging Bank shares for holding company shares in any subsequent
conversion of the Mutual Company to stock form; (ii) Dividends waived by the
Mutual Company shall not be available for payment to or the value thereof
transferred to Minority Stockholders by any means including through dividend
payments or at liquidation; (iii) Beginning five years after April 19, 1996, the
date of consummation of the Bank's acquisition of First Federal, the Mutual
Company will make prior application to and shall receive the approval of the FRB
prior to waiving any dividends declared on the capital stock of the Bank, and
the FRB shall have the authority to approve or deny any dividend waiver request
in its discretion, and after such date such application may be made on an annual
basis with respect to any year in which the Mutual Company intends to waive
dividends paid by the Bank; (iv) After April 19, 1996, the date of consummation
of the Bank's acquisition of First Federal, the amount of waived dividends that
are identified as belonging to the Mutual Company shall not be available for
payment to, or the value transferred to, Minority Stockholders, either through
dividend payments, upon the conversion of the Mutual Company to stock form, upon
the redemption of shares of the Bank, upon the Bank's issuance of additional
shares, at liquidation, or by any other means; (v) The Mutual Company shall
notify the FRB of all such transactions and will make available to the FRB such
information as the FRB determines to be appropriate; (vi) The Bank will take
into account when setting its dividend rate the declaration rate in relation to
net income and the rate's effect on the Bank's ability to issue capital; and
(vii) The dividend rate will be reasonable and sustainable upon a full
conversion to stock form of the Mutual Company; (vii) In the event that the FRB
adopts regulations regarding dividends waivers by mutual holding companies, the
Mutual Company will comply with the applicable requirements of such regulations.
After the completion of the Two-Tier Reorganization, the commitments became
applicable to dividends paid by the Company that are waived by the Mutual
Company.
If the Mutual Company decides that it is in its best interest to waive the
right to receive a particular dividend to be paid by the Company, and, if
necessary, the FRB approves such waiver, then the Company pays such dividend
only to Minority Stockholders, and the amount of the dividend waived by the
Mutual Company is treated in the manner described above. The Mutual Company's
decision as to whether or not to waive a particular dividend depends on a number
of factors, including the Mutual Company's capital needs, the investment
alternatives available to the Mutual Company as compared to those available to
the Company, and the receipt of required regulatory approvals. There can be no
assurance that (i) after the Offering the Mutual Company will waive dividends
paid by the Company, (ii) the FRB will approve any dividend waivers by the
Mutual Company after April 2001, or (iii) the terms that may be imposed by the
FRB on any dividend waiver will be favorable to Minority Stockholders.
As of the date hereof, the Mutual Company has waived the right to receive
all dividends paid by the Bank and the Company. As of April 19, 1996, the Mutual
Company had waived $9.1 million of dividends declared by the Bank, and through
June 30, 1998, had waived a total of $19.5 million of dividends paid by the Bank
and the Company.
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Offering is completed. However, net proceeds are currently
estimated to be between $_______ million and $______ million. The estimated net
proceeds have been calculated based upon the following assumptions: (i) the ESOP
will purchase 2% of the shares issued in the Offering; (ii) officers, directors,
and employees of the Company and the Bank and their immediate families will
purchase $1.3 million of Common Stock; (iii) Ryan Beck will receive a fee equal
to 2.0% of the aggregate dollar amount of the shares sold, except that no fees
will be paid on shares sold to the ESOP, officers, directors and employees of
the Company and Bank and their immediate family members; and (iv) fixed expenses
incurred in connection with the Offering will be $500,000.
Pro forma consolidated net income of the Company for the three months ended
March 31, 1998 and the year ended December 31, 1997, has been calculated based
on historical earnings for such periods, and assumes that the
18
<PAGE>
estimated net proceeds received by the Company and Bank were invested at _____ %
and ______% at the beginning of such periods. The yield for the Company and the
Bank represents the arithmetic average of the average yield on the Bank's
interest-earning assets and the average cost of deposits and borrowings for such
periods. The effect of withdrawals from deposit accounts for the purchase of
Common Stock has not been reflected. The pro forma after-tax yield for the
Company and Bank is assumed to be _________% and __________% based on an
effective tax rate of _____%. No effect has been given in the pro forma
stockholders' equity calculations for the assumed earnings on the net proceeds.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company computed in accordance with generally accepted accounting principles
("GAAP") after giving effect to the Offering.
<TABLE>
<CAPTION>
At or For the Three Months Ended At or For the Year Ended
March 31, 1998 December 31, 1997
----------------------------------- ------------------------------------
Minimum Midpoint Maximum Minimum Minimum Minimum
Price of Price of Price of Price of Price of Price of
$_____ $____ $____ $____ $____ $____
Per Share Per Share Per Share Per Share Per Share Per Share
--------- --------- --------- --------- --------- ---------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds............................. $ $ $ $ $ $
Less:
Offering expenses.......................
--------- --------- --------- --------- --------- ---------
Marketing expenses......................
--------- --------- --------- --------- --------- ---------
Estimated net proceeds.................. $ $ $ $ $ $
Consolidated net income:
Historical................................ $ $ $ $ $ $
Pro forma income on net proceeds..........
Pro forma ESOP adjustment (1).............
Pro forma restricted stock plan
adjustment (2)...........................
--------- --------- --------- --------- --------- ---------
Pro forma net income (3)................. $ $ $ $ $ $
Per share net income (4):
Historical................................ $ $ $ $ $ $
Pro forma income on net proceeds..........
Pro forma ESOP adjustment (1).............
Pro forma restricted stock plan
adjustment (2)...........................
--------- --------- --------- --------- --------- ---------
Pro forma net income per share (3)....... $ $ $ $ $ $
Stockholders' equity:
Historical:............................... $ $ $ $ $ $
Estimated net proceeds....................
Less: Common Stock acquired by ESOP (1)...
Less: Common Stock acquired by restricted
stock plan (2)...........................
--------- --------- --------- --------- --------- ---------
Pro forma stockholders' equity (3)....... $ $ $ $ $ $
Stockholders' equity per share (4):
Historical................................ $ $ $ $ $ $
Estimated net proceeds....................
Less: Common Stock acquired by ESOP (1)...
Less: Common Stock acquired by restricted
stock plan (2)...........................
--------- --------- --------- --------- --------- ---------
Pro forma stockholders' equity per share
(3)..................................... $ $ $ $ $ $
Offering price as a percentage of pro forma
stockholders' equity per share (3) (4)....
Offering price as a multiple of pro forma
net income per share (3)..................
</TABLE>
- ----------------------
(1) Assumes that 2% of the shares of Common Stock issued in the Offering will
be purchased by the ESOP, and that the funds used to acquire such shares
will be borrowed by the ESOP from the Company. The Bank intends to make
scheduled discretionary contributions to the ESOP in amounts at least equal
to the principal and interest requirement of the debt. The Bank's total
annual expense in payment of the ESOP debt is based upon ____ equal annual
installments of principal, with an assumed annual interest rate of 8.5%.
Statement of Position 93-6 requires that an employer record compensation
expense in an amount equal to the fair value of shares committed to be
released to employees. The pro forma net income assumes as follows: (i) the
Bank's total contributions for the periods presented are equivalent to the
debt service requirement for such periods and were made at the end of the
periods; (ii) the annual interest rate applicable to the debt was 8.5%;
(iii) ___% of the ESOP shares were committed to be released during the
three months ended March 31, 1998, and ____% were committed to be released
during 1997 at an average fair value assumed to be the price at which
shares are sold in the Offering. If the shares were to appreciate in value
over time, compensation expense relating to the ESOP will likely increase.
The amount borrowed results in a reduction of stockholders' equity.
19
<PAGE>
(2) Assumes that the Company's restricted stock plans purchase in the open
market a number of shares of Common Stock equal to 4% of shares sold in the
Offering at a purchase price equal to the price at which shares are sold in
the Offering. The shares of restricted stock are assumed to vest over a 10
year period.
(3) If the number of shares sold in the Offering is increased by 15%, then at
the minimum, midpoint and maximum of the Offering Price Range pro forma net
income would be $_______ million, $_____ million, and $_______ million, pro
forma net income per share would be $_______________, $________________,
and $______________, pro forma stockholders' equity would be $______
million, $________ million, and $_____ million, pro forma stockholders
equity per share would be $_____________________,
$________________________, and $__________________, the offering price as a
percentage of pro forma stockholders equity per share would be _______%,
________%, and _________%, and the offering price as a percentage of pro
forma net income per share would be __________x, ________x, and _______x,
respectively.
(4) Historical net income per share is based on _______ and [34,180,120]
weighted average shares outstanding during the three months ended March 31,
1998 and the year ended December 31, 1997, respectively. Pro forma
adjustments to net income per share are based on such amounts less ESOP
shares assumed not to be committed to be released. Historical and pro
forma stockholder' equity per share is based on _______ and 34,076,061
total shares outstanding at March 31, 1998, and December 31, 1997,
respectively. No effect has been given to shares that would be issued as a
result of the exercise of stock options.
The following table sets forth information regarding intended Common Stock
subscriptions by each of the Directors and executive officers of the Company and
the Bank and their associates, and by all such Directors and executive officers
as a group. This table excludes shares and stock options currently owned,
shares to be purchased by the ESOP, and any future restricted stock plan or
stock option plan awards.
<TABLE>
<CAPTION>
As a percentage of the
Number of shares at Offering at
------------------------- -------------------------
Aggregate $______ $______ $______ $______ $______ $______
Purchase Per Per Per Per Per Per
Name Price Share Share Share Share Share Share
- ----------------------------------------- ---------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles C. Pearson....................... $ 200,000
Ernest P. Davis.......................... 50,000
Jimmie C. George......................... 100,000
Robert A. Houck.......................... 25,000
Bruce S. Isaacman........................ 75,000
Robert E. Kessler........................ 45,000
William E. McClure, Jr................... 125,000
William A. Siverling..................... 100,000
Frank R. Sourbeer........................ 100,000
Donald B. Springer....................... 50,000
James L. Durrell......................... 58,000
William M. Long.......................... 25,000
Lyle B. Shughart......................... 25,000
John C. Coulson.......................... 100,000
Richard C. Ruben......................... 25,000
John W. Atkinson......................... 50,000
Jane B. Tompkins......................... 50,000
Andrew S. Samuel......................... 25,000
All Directors and Executive Officers as
a Group (18 persons).................. 1,228,000
</TABLE>
THE OFFERING
THE DEPARTMENT AND THE FRB HAVE APPROVED THE STOCK ISSUANCE PLAN SUBJECT TO
THE SATISFACTION OF CERTAIN CONDITIONS. SUCH APPROVAL DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE OFFERING OR THE PLAN BY THE DEPARTMENT OR
THE FRB.
General
On June 16, 1998, the Board of Directors of the Company, by a unanimous
vote, adopted the Plan, pursuant to which the Company is offering additional
shares of common stock to Eligible Account Holders, the ESOP and
20
<PAGE>
Supplemental Eligible Account Holders in a Subscription Offering, and possibly
to Minority Stockholders and certain others in a Community Offering. In adopting
the Plan, the Board of Directors has determined that the Offering is advisable
and in the best interest of the Company and its stockholders and customers. The
Plan was ratified by a unanimous vote of the Mutual Company's Board of Trustees
who determined that the Plan and the Offering is advisable and in the best
interest of the Mutual Company and the Bank's depositors, and was unanimously
ratified by the Bank's Board of Directors who determined that the Plan and the
Offering is advisable and in the best interest of the Bank and its customers.
The Offering will enable the Company and the Bank to increase their
regulatory capital. As of March 31, 1998, the Company's Tier 1 capital was 6.5%
of average assets, and the Bank's Tier 1 capital was 6.9% of average assets. See
"Regulatory Capital Compliance." Management determined to offer 2,000,000 shares
in the Offering. Management determined to offer 2,000,000 shares rather than a
larger number of shares, or a full conversion of the Mutual Company, because
management believes that the proceeds of the Offering will provide the Company
with adequate capital to implement its business strategy at this time and that
in view of its current strategy the additional capital that would be raised in a
larger offering would create pressure to make investments that would be overly
risky. Although management believes the Offering will, at least in the short
term, reduce the Company's return on average equity, management also believes
that the sale of a larger number of shares would cause an even greater reduction
in the Company's return on equity.
In addition, the Offering will provide the Company with greater capital
resources to effect future corporate transactions, including acquisitions, and
otherwise enhance the Company's ability, primarily through the Bank, to render
services to customers and the community. Although there can be no assurances, it
is expected that the Offering will also significantly increase the number of
shares of Common Stock available to trade, which should increase the float and
liquidity of the Common Stock.
Under the terms of the Plan, at the conclusion of the Offering, if the
Company has accepted subscriptions for 2,000,000 shares of Common Stock, the
Mutual Company will contribute to the Company 2,000,000 shares of Common Stock
owned by the Mutual Company, which will then be canceled by the Company. As a
result, the number of shares of Common Stock owned by the Mutual Company will
decrease to 23,500,000 shares, or approximately 66.3% of the 33,957,950 shares
of Common Stock outstanding as of April 30, 1998, from 25,500,000 shares, or
approximately 75.1% of the shares of Common Stock outstanding as of such date.
At the conclusion of the Offering, in the sole discretion of the Company, the
total number of shares sold in the Offering (and contributed to the Company by
the Mutual Company) may be increased by up to 15%, whether shares are sold at
the minimum, mid-point or maximum of the Offering Price Range. The total number
of outstanding shares of Common Stock will not change as a result of the
Offering.
The Offering pursuant to the Plan will add financial strength to the
consolidated Company, thereby enhancing the value of the Mutual Company's
primary asset. The increase in the Company's capital will increase the Company's
ability to serve as a source of strength to the Bank, and the increase in the
Company's and the Bank's capital will provide additional protection to the
Bank's depositors. Certain of the Bank's depositors will also be given
subscription rights to purchase the Common Stock issued pursuant to the Plan.
Although the Mutual Company's contribution of shares of Common Stock to the
Company will decrease the percentage of the Company owned by the Mutual Company,
it will increase the aggregate book value of the shares of Common Stock held by
the Mutual Company and will only slightly (or not at all) decrease the aggregate
earnings attributable to the shares of Common Stock held by the Mutual Company.
The Offering does not preclude the Mutual Company from conducting a mutual-to-
stock conversion in the future.
Stock Pricing, Number of Shares to be Issued and Fairness Opinion
The Company has determined to offer 2,000,000 shares of Common Stock
(subject to adjustment to up to 2,300,000 shares). In order to consummate the
Offering, all shares must be sold. The Company's Board of Directors,
21
<PAGE>
in consultation with its financial advisor, Ryan Beck, has established an
Offering Price Range of $_______ to $_____ per share, or an aggregate offering
range of $___________ million to $___________ million. All shares of Common
Stock will be sold at the Actual Purchase Price to be determined by the Company.
The Actual Purchase Price is expected to be within the Offering Price Range.
All subscribers must subscribe for a dollar amount of Common Stock. The
total number of shares that will be issued to a subscriber will be equal to the
total dollar amount of the subscription divided by the Actual Purchase Price per
share, subject to the applicable purchase limitations and allocations in the
event of an oversubscription. Fractional shares will not be issued; instead, the
Company will refund partial subscriptions that are insufficient to purchase a
whole share.
Unless authorized by the Company or required by the Department, no
resolicitation of subscribers will be made unless the Actual Purchase Price per
share is less than $_____ or more than $__________. If the Actual Purchase Price
is not within the Offering Price Range and the Company determines to continue
the Offering, subscribers will be offered the opportunity to modify or withdraw
their order, and, unless an affirmative response is received in a designated
period of time, will have their funds returned promptly with interest, and/or
their withdrawal authorizations canceled.
The Board of Directors will establish the Actual Purchase Price based on
market and financial conditions. The Board of Directors will obtain a written
fairness opinion, dated as of the consummation of the Offering, to the effect
that the pricing of the Common Stock is fair from a financial point of view to
(i) the Mutual Company and the Bank's depositors, and (ii) stockholders of the
Company including stockholders other than the Mutual Company (the "Fairness
Opinion").
The Board has retained Ryan Beck to render the Fairness Opinion. Ryan Beck
was selected by the Company because of its knowledge of, experience with, and
reputation in the financial services industry. Ryan Beck has substantial
experience in the valuation of bank and thrift securities and has knowledge of
the trading markets for such securities as a result of its market-making for the
stocks of financial institutions. Ryan Beck is headquartered in New Jersey, and
has served numerous financial institutions nationwide in the capacities of
market maker, securities offering underwriter or selling marketing agent and
merger consultant.
In arriving at its opinion, Ryan Beck intends to consider relevant market
and financial data, including, but not limited to (1) the Prospectus; (2) the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 and
the Bank's Annual Report on Form F-2 for the years ended December 31, 1996 and
1995; (3) the Company's Annual Report to Stockholders for the year ended
December 31, 1997 and the Bank's Annual Report to Stockholders for the years
ended December 31, 1996 and 1995; (4) the Company's Quarterly Report on Form 10-
Q for the period ended March 31, 1998; (5) certain operating and financial
information including projections provided by management regarding the Company's
business and prospects including the pro forma impact of the Offering; (6)
historical market prices of the Common Stock and the relationship of the market
price to tangible book value per share and earnings per share; (7) the trading
volume in the Common Stock; (8) historical stock market prices associated with
all mutual holding company stocks listed on the Nasdaq National Market in
relation to tangible book value and earnings per share; (9) an analysis of
projected fully converted valuations for savings institutions in the mutual
holding company structure, including the Company; (10) the trading volume of all
Nasdaq National Market listed mutual holding company stocks; (11) the market for
fully converted thrift equities; and (12) other such studies, analyses,
inquiries and examinations as were deemed appropriate.
The Fairness Opinion, which is based on a number of projections, is not
intended as a recommendation as to the advisability of purchasing shares of
Common Stock in the Offering. No assurance can be given that those who purchase
shares of Common Stock in the Offering will be able to sell such shares after
the Offering at or above the Actual Purchase Price. No opinion will be given as
to the fairness of the Actual Purchase Price to purchasers of stock in the
Offering.
22
<PAGE>
Ryan Beck served as the Bank's selling agent for its initial stock offering
in 1994. Ryan Beck's equity research department follows Pennsylvania bank and
thrift stocks. Since 1994, Ryan Beck has made a market in the Company's stock.
In its capacity as market maker, from time to time, Ryan Beck may own or be
short shares of Common Stock. As of the date of this Prospectus, Ryan Beck
currently does not have a material long or short position in the Common Stock.
Subscription Offering and Subscription Rights
In accordance with the Plan, rights to subscribe for the purchase of Common
Stock in the Subscription Offering have been granted under the Plan in the
following order of descending priority. All subscriptions received will be
subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering
and to the maximum, minimum, and overall purchase limitations set forth in the
Plan and as described below under "--Limitations on Common Stock Purchases."
Priority 1: Eligible Account Holders. Each depositor with aggregate deposit
account balances of $50 or more (a "Qualifying Deposit") as of May 31, 1997 (the
"Eligibility Record Date," and such account holders, "Eligible Account Holders")
will receive nontransferable subscription rights to subscribe in the
Subscription Offering for Common Stock equal to up to the greater of $250,000,
or fifteen times the product (rounded down to the next whole number) obtained by
multiplying the aggregate number of shares of Common Stock issued in the
Offering by a fraction of which the numerator is the amount of the Eligible
Account Holder's Qualifying Deposit and the denominator is the total amount of
Qualifying Deposits of all Eligible Account Holders, in each case on the
Eligibility Record Date, subject to the overall purchase limitation. See "--
Limitations on Common Stock Purchases." If there are not sufficient shares
available to satisfy all subscriptions, shares first will be allocated so as to
permit each subscribing Eligible Account Holder to purchase a number of shares
sufficient to make his total allocation equal to the lesser of 100 shares or the
number of shares for which he subscribed. Thereafter, unallocated shares will be
allocated to each subscribing Eligible Account Holder whose subscription remains
unfilled in the proportion that the amount of his aggregate Qualifying Deposit
bears to the total amount of Qualifying Deposits of all subscribing Eligible
Account Holders whose subscriptions remain unfilled. If an amount so allocated
exceeds the amount subscribed for by any one or more Eligible Account Holders,
the excess shall be reallocated among those Eligible Account Holders whose
subscriptions are not fully satisfied until all available shares have been
allocated.
To ensure proper allocation of stock, each Eligible Account Holder must
list on his order form all deposit accounts in which he has an ownership
interest on the Eligibility Record Date. Failure to list an account could result
in fewer shares being allocated than if all accounts had been disclosed. Neither
the Company nor the Bank nor any of their agents shall be responsible for orders
on which all Qualifying Deposit accounts have not been fully and accurately
disclosed. The subscription rights of Eligible Account Holders who are also
directors or officers of the Bank or their associates will be subordinated to
the subscription rights of other Eligible Account Holders to the extent
attributable to increased deposits in the twelve months preceding the
Eligibility Record Date.
Priority 2: Employee Plans. To the extent that there are sufficient shares
remaining after satisfaction of subscriptions by Eligible Account Holders, the
ESOP will receive nontransferable subscription rights to purchase Common Stock
in the Offering on behalf of ESOP participants subject to the purchase
limitations described herein. The ESOP intends to subscribe for 40,000 shares of
the Common Stock issued in the Offering.
Priority 3: Supplemental Eligible Account Holders. To the extent that there
are sufficient shares remaining after satisfaction of subscriptions by Eligible
Account Holders and the ESOP, each depositor with a Qualifying Deposit as of
June 30, 1998 (the "Supplemental Eligibility Record Date") who is not an
Eligible Account Holder ("Supplemental Eligible Account Holder") will receive
nontransferable subscription rights to subscribe in the Subscription Offering
for Common Stock equal to the greater of $250,000, or fifteen times the product
(rounded down to the next whole number) obtained by multiplying the aggregate
number of shares of Common Stock issued in the Offering, by a fraction of which
the numerator is the amount of the Supplemental Eligible Account Holder's
Qualifying Deposit and the denominator
23
<PAGE>
is the total amount of Qualifying Deposits of all Supplemental Eligible Account
Holders, in each case on the Supplemental Eligibility Record Date, subject to
the overall purchase limitation. See "--Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all subscriptions,
shares first will be allocated so as to permit each subscribing Supplemental
Eligible Account Holder to purchase a number of shares sufficient to make his
total allocation equal to the lesser of 100 shares or the number of shares for
which he subscribed. Thereafter, unallocated shares will be allocated to each
subscribing Supplemental Eligible Account Holder and whose subscription remains
unfilled in the proportion that the amount of his Qualifying Deposit bears to
the total amount of Qualifying Deposits of all subscribing Supplemental Eligible
Account Holders whose subscriptions remain unfilled.
To ensure proper allocation of stock, each Supplemental Eligible Account
Holder must list on his order form all deposit accounts in which he has an
ownership interest on the Supplemental Eligibility Record Date. Failure to list
an account could result in fewer shares being allocated than if all accounts had
been disclosed. Neither the Company nor the Bank nor any of their agents shall
be responsible for orders on which all Qualifying Deposit accounts have not been
fully and accurately disclosed.
Expiration Date for the Subscription Offering. The Subscription Offering
will expire on ____________, 1998, unless extended for up to 45 days or such
additional periods by the Bank with the approval of the Department, if necessary
(as so extended, the "Expiration Date"). The Bank and the Company are not
required to give subscribers notice of any such extension. Subscription rights
which have not been exercised prior to the conclusion of the Subscription
Offering will become void.
Members in Nonqualified States or Foreign Countries. The Company will make
reasonable efforts to comply with the securities laws of all states in the
United States in which persons entitled to subscribe for stock pursuant to the
Plan reside. However, the Company is not required to offer stock in the Offering
to any person who resides in a foreign country or resides in a state of the
United States with respect to which (i) a small number of persons otherwise
eligible to subscribe for shares of Common Stock reside; or (ii) the Company
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including but not limited to a
request that the Company or its officers or directors, under the securities laws
of such state, register as a broker, dealer, salesman or selling agent or to
register or otherwise qualify the subscription rights or Common Stock for sale
or subject any filing with respect thereto in such state. Where the number of
persons eligible to subscribe for shares in one state is small, the Company will
base its decision as to whether or not to offer the Common Stock in such state
on a number of factors, including the size of accounts being held by account
holders in the state, the cost of registering or qualifying the shares or the
need to register the Company, its officers, directors or employees as brokers,
dealers or salesmen.
Community Offering
Any shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in a Community Offering. If a Community Offering is
conducted, it will be for a period of not more than 45 days and will terminate
on _________, 1998 unless extended by the Company and the Bank, and may commence
anytime subsequent to the commencement of the Subscription Offering. No person,
by himself or herself, or with an associate or group of persons acting in
concert, may subscribe for or purchase more than $500,000 of Common Stock
offered in the Community Offering. Further, the Company may limit total
subscriptions so as to assure that the number of shares available for any
syndicated community offering may be up to a specified percentage of the number
of shares of Common Stock. Finally, the Company may reserve shares offered in
the Community Offering for sales to institutional investors.
In the event of an oversubscription for shares in the Community Offering,
available shares may be allocated in the sole discretion of the Company first to
cover orders of Minority Stockholders as of _____, 1998 and then natural persons
residing in the Community, then to cover the orders of any other person
subscribing for shares in the Community Offering so that each person in such
category of the Community Offering may receive 1,000 shares, and
24
<PAGE>
thereafter, on a pro rata basis to persons in such category of the Community
Offering based on the amount of their respective subscriptions.
The terms "residence," "reside," "resided" or "residing" as used herein
with respect to any person shall mean any person who occupied a dwelling within
the Bank's Community, has an intent to remain within the Community for a period
of time, and manifests the genuineness of that intent by establishing an ongoing
physical presence within the Community together with an indication that such
presence within the Community is something other than merely transitory in
nature. To the extent the person is a corporation or other business entity, the
principal place of business or headquarters shall be in the Community. To the
extent a person is a personal benefit plan, the circumstances of the beneficiary
shall apply with respect to this definition. In the case of all other benefit
plans, the circumstances of the trustee shall be examined for purposes of this
definition. The Bank may utilize deposit or loan records or such other evidence
provided to it to make a determination as to whether a person is a resident. In
all cases, however, such a determination shall be in the sole discretion of the
Bank.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person in the Community
Offering.
Syndicated Community Offering
Any shares of Common Stock not sold in the Subscription Offering or in the
Community Offering, if any, may be offered for sale to the general public by a
selling group of broker-dealers, which may include Ryan Beck, to be managed by
Ryan Beck in a syndicated community offering, subject to terms, conditions and
procedures as may be determined by the Bank and the Company in a manner that is
intended to achieve the widest distribution of the Common Stock subject to the
rights of the Company to accept or reject in whole or in part all orders in the
syndicated community offering. It is expected that the syndicated community
offering, if any, will commence as soon as practicable after termination of the
Subscription Offering and the Community Offering. The syndicated community
offering shall be completed within 45 days after the termination of the
Subscription Offering and no later than 90 days after the receipt of certain
regulatory approvals, unless such period is extended as provided herein. The
Company will pay a fee of up to 6.5% of the total dollar amount of the Common
Stock sold by the selling group, which amount includes a management fee to Ryan
Beck of 1.5%.
If for any reason a syndicated community offering of unsubscribed shares of
Common Stock is not advisable or cannot be effected and any shares remain unsold
after the Subscription Offering and any Community Offering, the Boards of
Directors of the Bank and the Company will seek to make other arrangements to
sell the remaining shares. Such other arrangements will be subject to Department
approval and to compliance with applicable state and federal securities laws.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person in the syndicated
community offering.
Plan of Distribution and Selling Commissions
Offering materials initially have been distributed to depositors with
subscription rights. All prospective purchasers are to send payment along with a
properly completed Order Form directly to the Bank, where such funds will be
held in a segregated savings account and not released until the Offering is
completed or terminated.
To assist in the marketing of the Common Stock, the Bank and the Company
have retained Ryan Beck, a broker-dealer registered with the National
Association of Securities Dealers, Inc. (the "NASD"). Ryan Beck will provide
advisory assistance and assist the Bank in the Offering as follows: (i) in
training and educating the Bank's employees regarding the Offering and their
roles; (ii) assisting in design and implementation of a marketing strategy; and
(iii) managing a Stock Information Center and coordinating selling efforts. For
these services, Ryan Beck will receive an
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advisory and management fee of $50,000, a marketing fee equal to 2.0% of the
total dollar amount of stock sold in the Subscription and Community Offering to
subscribers other than the ESOP and officers, directors, and employees of the
Company and Bank and their immediate family members. Ryan Beck will also receive
a fee equal to 1.5% of the aggregate dollar amount of stock sold in any
Subscription Offering, which fee along with the fee payable to selected dealers
shall not exceed 6.5% in the aggregate. The Bank has made an advance payment to
Ryan Beck in the amount of $15,000. Offers and sales in the Offering will be on
a best efforts basis and, as a result, Ryan Beck is not obligated to purchase
shares of the Common Stock in the Offering.
The Bank also will reimburse Ryan Beck for its reasonable out-of-pocket
expenses associated with its marketing effort, the estimated maximum of which is
$72,500 (including legal fees and expenses up to a maximum of $57,500). The Bank
and the Company will indemnify Ryan Beck against liabilities and expenses
(including legal fees) incurred in connection with certain claims or litigation
arising out of or based upon untrue statements or omissions contained in the
offering material for the Common Stock, including liabilities under the
Securities Act of 1933.
Certain directors and executive officers of the Company and Bank may
participate in the solicitation of offers to purchase Common Stock. Such persons
will be reimbursed by the Company for their reasonable out-of-pocket expenses,
including, but not limited to, de minimis telephone and postage expenses,
incurred in connection with such solicitation. Other regular, full-time
employees of the Bank may participate in the Offering but only in ministerial
capacities, providing clerical work in effecting a sales transaction or
answering questions of a potential purchaser provided that the content of the
employee's responses is limited to information contained in the Prospectus or
other offering documents, and no offers or sales may be made by tellers or at
the teller counter. All sales activity will be conducted in a segregated or
separately identifiable area of the Bank's offices apart from the area
accessible to the general public for the purpose of making deposits or
withdrawals. Other questions of prospective purchasers will be directed to
executive officers or registered representatives. Such other employees have been
instructed not to solicit offers to purchase Common Stock or provide advice
regarding the purchase of Common Stock. The Company will rely on Rule 3a4-1
under the Exchange Act, and sales of Common Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees to
participate in the sale of Common Stock. No officer, director or employee of the
Company or the Bank will be compensated in connection with his participation by
the payment of commissions or other remuneration based either directly or
indirectly on the transactions in the Common Stock.
Procedure for Purchasing Shares
Expiration Date. The Offering will terminate at 10:00 a.m., Pennsylvania
time, on _________, 1998, unless extended by the Company, with prior approval of
the Department, if required, for up to an additional 45 days (as extended, the
"Expiration Date"). The Company may extend the Offering without further approval
or additional notice to purchasers in the Offering. Any extension of the
Offering beyond _______, 1998 would be subject to Department approval and
subscribers would be given the right to increase, decrease, or rescind their
orders for Common Stock. If 2,000,000 shares are not sold by the Expiration Date
the Company may terminate the Offering and promptly refund all orders for Common
Stock. If the Actual Purchase Price per share is outside the Offering Price
Range, purchasers will be given an opportunity to increase, decrease, or rescind
their orders.
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of an order form
will confirm receipt or delivery in accordance with Rule 15c2-8. Order forms
will be distributed only with a Prospectus.
The Company reserves the right in its sole discretion to terminate the
Offering at any time and for any reason, in which case the Company will promptly
return all purchase orders, plus interest at its current passbook rate from the
date of receipt and cancel all authorized withdrawals from deposit accounts.
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Use of Order Forms. In order to purchase the Common Stock, each purchaser
must complete an order form, except for certain persons purchasing in the
Syndicated Community Offering. Any person receiving an order form who desires to
purchase Common Stock must do so by delivering (by mail or in person) to the
Company a properly executed and completed order form, together with full payment
for the shares purchased, which must be received by the Company prior to 10:00
a.m., Pennsylvania time on _________, 1998. Photo-copied or facsimile order
forms will not be accepted. Once tendered, an order form cannot be modified or
revoked without the consent of the Company unless the Offering is not completed
by ____________, 1998. The Company reserves the absolute right, in its sole
discretion, to reject orders received in the Community Offering, in whole or in
part, at the time of receipt or at any time prior to completion of the Offering.
Each person ordering shares is required to represent that he is purchasing such
shares for his own account and that he has no agreement or understanding with
any person for the sale or transfer of such shares. The interpretation by the
Company of the terms and conditions of the Plan and of the acceptability of the
order forms will be final.
All subscribers must subscribe for a dollar amount of Common Stock. The
total number of shares that will be issued to a subscriber will be equal to the
total dollar amount of stock for which such subscription has been accepted
divided by the Actual Purchase Price per share, subject to the applicable
purchase limitations and allocations in the event of an oversubscription.
Fractional shares will not be issued; instead, the Company will refund any
partial subscription that is insufficient to purchase a whole share.
Payment for Shares. Payment for all shares will be required to accompany
all completed order forms for the purchase to be valid. Payment for shares may
be made by (i) check or money order made payable to the Company, or (ii)
authorization of withdrawal from savings accounts and certificates of deposit
maintained with the Bank. Appropriate means by which such withdrawals may be
authorized are provided in the order forms. Once such a withdrawal amount has
been authorized, a hold will be placed on such funds, making them unavailable to
the depositor. All funds authorized for withdrawal will continue to earn
interest at the contract rate until the Offering is completed or terminated.
Interest penalties for early withdrawal applicable to certificate accounts will
not apply to withdrawals authorized for the purchase of shares; however, if a
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate shall be canceled at the
time of withdrawal without penalty, and the remaining balance will earn interest
at the passbook rate. In the case of payments made by check or money order, such
funds will be placed in a segregated savings account and interest will be paid
by the Bank at the current passbook rate, from the date payment is received
until the Offering is completed or terminated.
A depositor interested in using his or her IRA funds to purchase Common
Stock must do so through a self-directed IRA. Since the Bank does not offer
self-directed accounts, it will allow a depositor to make a trustee-to-trustee
transfer of Bank IRA funds to a trustee offering a self-directed IRA program
without early withdrawal penalties with the agreement that such funds will be
used to purchase the Common Stock in the Offering. There will be no early
withdrawal or IRS interest penalties for such transfers. The new trustee would
hold the Common Stock in a self-directed account in the same manner as the Bank
now holds the depositor's IRA funds. An annual administrative fee may be payable
to the new trustee. Depositors interested in using funds in a Bank IRA to
purchase Common Stock should contact the Stock Information Center at the Bank as
soon as possible so that the necessary forms may be forwarded for execution and
returned prior to the Expiration Date.
In addition, the provisions of ERISA and Internal Revenue Service
("Service") regulations require that executive officers, directors and 10%
stockholders who use self-directed IRA funds to purchase shares of Common Stock
in the Offering, make such purchase for the exclusive benefit of the IRA
participant.
The ESOP will not be required to pay for shares purchased until
consummation of the Offering, provided that there is in force from the time the
order is received a loan commitment from an unrelated financial institution or
the Company to lend to the ESOP the necessary amount to fund the purchase.
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Delivery of Stock Certificates. Certificates representing Common Stock
issued in the Offering and checks representing interest paid on subscriptions
made by check or money order will be mailed to the persons entitled thereto at
the address noted on the order form, as soon as practicable following
consummation of the Offering and receipt of all necessary regulatory approvals.
Any certificates returned as undeliverable will be held by the Bank until
claimed by persons legally entitled thereto or otherwise disposed of in
accordance with applicable law. Until certificates for the Common Stock are
available and delivered to purchasers, purchasers may not be able to sell the
shares of stock which they ordered. Regulations prohibit the Bank from lending
funds or extending credit to any persons to purchase Common Stock in the
Offering.
Other Restrictions. Notwithstanding any other provision of the Plan, no
person is entitled to purchase any Common Stock to the extent such purchase
would be illegal under any federal or state law or regulation (including state
"blue-sky" registrations), or would violate regulations or policies of the NASD,
particularly those regarding free riding and withholding. The Bank and/or its
agents may ask for an acceptable legal opinion from any purchaser as to the
legality of such purchase and may refuse to honor any such purchase order if
such opinion is not timely furnished.
Restrictions on Transfer of Subscription Rights and Shares
Subscription rights are nontransferable. Persons receiving such rights are
not permitted to transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the Plan or prior to the completion of the Offering, the shares of Common
Stock to be issued upon their exercise. Such rights may be exercised only by the
person to whom they are granted and only for his account. Each person exercising
such subscription rights will be required to certify that he is purchasing
shares solely for his own account and that he has no agreement or understanding
regarding the sale or transfer of such shares. In addition, persons may not
offer or make an announcement of an offer or intent to make an offer to purchase
such subscription rights or shares of Common Stock prior to the completion of
the Offering. The Company will pursue any and all legal and equitable remedies
in the event management become aware of the transfer of subscription rights and
will not honor orders known by them to involve the transfer of such rights.
The Bank and the Company will pursue any and all legal and equitable
remedies in the event they become aware of the transfer of subscription rights
and will not honor orders known by them to involve the transfer of such rights.
Limitations on Common Stock Purchases
The following additional limitations have been imposed upon purchases of
shares of Common Stock. Defined terms used in this section and not otherwise
defined in this Prospectus shall have the meaning set forth in the Plan. In all
cases, the Bank shall have the right, in its sole discretion, to determine
whether prospective purchasers are "Associates," or "Acting in Concert" as
defined by the Plan and in interpreting any and all other provisions of the
Plan. All such determinations are in the sole discretion of the Bank, and may be
based on whatever evidence the Bank chooses to use in making any such
determination.
(1) The aggregate amount of outstanding Common Stock of the Company owned
or controlled by persons other than Mutual Company at the close of the Offering
shall be less than 50% of the Company's total outstanding Common Stock.
(2) Except for the ESOP, no Eligible Account Holder or Supplemental
Eligible Account Holder may in their capacities as such purchase in the
Subscription Offering more than $250,000 of Common Stock, and no person or group
of persons Acting in Concert may purchase more than $500,000 of Common Stock
issued in the Offering, except that: (i) the Company may, in its sole discretion
and without further notice to or solicitation of subscribers or other
prospective purchasers, increase such maximum purchase limitations to up to 5%
of the number of shares issued in the Offering or decrease them to 1% of the
number of shares issued in the Offering; (ii) Tax-Qualified Employee
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Plans may purchase up to 10% of the shares issued in the Offering; and (iii) for
purposes of this paragraph shares to be held by any Tax-Qualified Employee Plan
and attributable to a person shall not be aggregated with other shares purchased
directly by or otherwise attributable to such person.
(3) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank and the Company, by all Management Persons and their
Associates, or non-tax qualified employee benefit plans, exclusive of any stock
acquired by such persons in the secondary market, shall not exceed 25% of the
outstanding shares of Common Stock of the Company held by persons other than the
Mutual Company at the close of the Offering. In calculating the number of shares
held by Management Persons and their Associates under this paragraph or under
the provisions of paragraph 4 below, shares held by any Tax-Qualified Employee
Benefit Plan or any Non-Tax-Qualified Employee Benefit Plan of the Bank that are
attributable to such persons shall not be counted.
(4) The aggregate amount of Common Stock acquired in the Offering plus all
prior issuances by the Bank and the Company, by all Management Persons and their
Associates, or non-tax qualified employee benefit plans, exclusive of any common
stock acquired by such persons in the secondary market, shall not exceed 25% of
the stockholders' equity of the Bank. In calculating the number of shares held
by Management Persons and their Associates under this paragraph or under the
provisions of paragraph 3 of this section, shares held by any Tax-Qualified
Employee Benefit Plan or any Non-Tax-Qualified Employee Benefit Plan of the Bank
that are attributable to such persons shall not be counted.
(5) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any non-tax-qualified employee
plan of the Company or the Bank or Management Person and their Associates,
exclusive of any shares of Common Stock acquired by such plan or persons in the
secondary market, shall not exceed 10% of the outstanding shares of Common Stock
held by persons other than the Mutual Company at the conclusion of the Offering.
In calculating the number of shares held by Management Persons and their
Associates under this paragraph, shares held by any tax-qualified employee plans
or non-tax-qualified employee plans of the Company or the Bank that are
attributable to such persons shall not be counted.
(6) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any non-tax-qualified employee
plan of the Company or the Bank or Management Person and their Associates,
exclusive of any shares of Common Stock acquired by such plan or persons in the
secondary market, shall not exceed 10% of the stockholders' equity of the
Company held by persons other than the Mutual Company at the conclusion of the
Offering.
(7) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any tax-qualified employee plan
of the Company, exclusive of any shares of Common Stock acquired by such plans
in the secondary market, shall not exceed 10% of the outstanding Common Stock
held by persons other than the Mutual Company at the conclusion of the Offering.
(8) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any tax-qualified employee plan
of the Company, exclusive of any shares of Common Stock acquired by such plans
in the secondary market, shall not exceed 10% of the stockholders' equity of the
Company held by persons other than the Mutual Company at the conclusion of the
Offering.
(9) The Boards of Directors of the Bank and the Company may, in their sole
discretion, increase the maximum purchase limitations to up to 9.9%, provided
that orders for Common Stock in excess of 5% of the number of shares of Common
Stock issued in the Offering shall not in the aggregate exceed 10% of the total
shares of Common Stock issued in the Offering (except that this limitation shall
not apply to purchases by Tax-Qualified Employee Plans). If such 5% limitation
is increased, subscribers for the maximum amount will be, and certain other
large subscribers in the sole discretion of the Company and the Bank may be,
given the opportunity to increase their subscriptions up to the
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then applicable limit. Requests to purchase additional shares of Common Stock
under this provision will be determined by the Board of Directors of the
Company, in its sole discretion.
(10) Notwithstanding any other provision of the Plan, no person shall be
entitled to purchase any Common Stock to the extent such purchase would be
illegal under any federal law or state law or regulation or would violate
regulations or policies of the NASD, particularly those regarding free riding
and withholding. The Company and/or its agents may ask for an acceptable legal
opinion from any purchaser as to the legality of such purchase and may refuse to
honor any purchase order if such opinion is not timely furnished.
(11) The Board of Directors of the Company has the right in its sole
discretion to reject any order submitted by a person whose representations the
Board of Directors believes to be false or who it otherwise believes, either
alone or acting in concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of the Plan.
The Company, in its sole discretion, may make reasonable efforts to comply
with the securities laws of any state in the United States in which its
depositors reside, and will only offer and sell the common stock in states in
which the offers and sales comply with such states' securities laws. However, no
person will be offered or allowed to purchase any Common Stock under the Plan if
they reside in a foreign country or in a state of the United States with respect
to which any of the following apply: (i) a small number of persons otherwise
eligible to purchase shares under the Plan reside in such state or foreign
county; (ii) the offer or sale of shares of Common Stock to such persons would
require the Bank or its employees to register, under the securities laws of such
state or foreign country, as a broker or dealer or to register or otherwise
qualify its securities for sale in such state or foreign country; or (iii) such
registration or qualification would be impracticable for reasons of cost or
otherwise.
The Plan defines "acting in concert" as follows: (i) knowing participation
in a joint activity or interdependent conscious parallel action towards a common
goal whether or not pursuant to an express agreement; (ii) a combination or
pooling of votes or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise; or (iii) a person or company
which acts in concert with another persons or company ("other party") shall also
be deemed to be acting in concert with any person or company who is also acting
in concert with the other party, except that any Tax-Qualified Employee Benefit
Plan or Non-Tax-Qualified Employee Benefit Plan will not be deemed to be acting
in concert with any other Tax-Qualified Employee Benefit Plan or Non-Tax-
Qualified Employee Benefit Plan or with its trustee or a person who serves in a
similar capacity solely for the purpose of determining whether stock held by the
trustee and stock held by the plan will be aggregated. The determination of
whether a group is acting in concert shall be made solely by the Board of
Directors of the Company or officers delegated by such Board, and may be based
on any evidence upon which the Board or such delegatee chooses to rely.
Under the Plan, the term "Associate," when used to indicate a relationship
with any Person, means: (i) any corporation or organization (other than the
Bank, the Company, the Mutual Company or a majority-owned subsidiary of any
thereof) of which such Person is a director, officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity; (iii) any relative or spouse of such Person or
any relative of such spouse, who has the same home as such Person or who is a
director, trustees, or officer of the Bank, the Mutual Company, the Company or
any subsidiary of the Mutual Company or the Company or any affiliate thereof;
and (iv) any person acting in concert with any of the persons or entities
specified in clauses (i) through (iii) above; provided, however, that any Tax-
Qualified or Non-Tax-Qualified Employee Plan shall not be deemed to be an
associate of any trustee, director or officer of the Mutual Company, the Company
or the Bank, to the extent provided in Section 9 of the Plan. When used to refer
to a Person other than an officer or director of the Bank, the Bank in its sole
discretion may determine the Persons that are Associates of other Persons.
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Directors are not treated as Associates of one another solely because of
their board membership. Compliance with the foregoing limitations does not
necessarily constitute compliance with other regulatory restrictions on
acquisitions of the Common Stock. For a further discussion of limitations on
purchases of the common stock during and subsequent to the Offering, see "--
Certain Restrictions on Purchases or Transfer of Shares After the Offering."
Benefits to Management in the Offering
The Bank's full-time employees participate in the Bank's ESOP which intends
to purchase 40,000 shares in the Offering. In addition, following the completion
of the Offering the Company intends to award to employees, officers and
directors at no cost to such persons: (i) a number of shares of restricted stock
equal to 4% of the shares sold in the Offering and (ii) options to purchase a
number of shares of Common Stock equal to 10% of the shares sold in the
Offering. Such awards will be made pursuant to the Company's existing stock
benefit plans or new stock benefit plans implemented by the Company. No such
awards will be made for at least six months after completion of the Offering,
and the Company will obtain stockholder approval of any such award made within
one year of the completion of the Offering.
Tax Effects of the Offering
Management believes that no gain or loss will be recognized to the Company
or the Mutual Company as a result of the Offering for federal or Pennsylvania
income tax purposes.
Management believes that the Offering will not result in any federal or
Pennsylvania income tax consequences to the Company or the Mutual Company,
except to the extent discussed below. Management believes that the Mutual
Company's contribution of a portion of its shares of Common Stock, and the
subsequent cancellation of those shares by the Company, qualifies as a tax-free
contribution of capital by the Mutual Company under section 118 of the Code.
Management believes that the Mutual Company's contribution of shares to the
Company is analogous to the situation in Commissioner v. Fink, 483 U.S. 89
(1987), in which the U.S. Supreme Court ruled that where majority stockholders
voluntarily surrender a portion of their stock to a corporation in an
unsuccessful attempt to increase the corporation's attractiveness to outside
investors, and where the majority stockholders retained control of the
corporation even after the surrender, they made a non-taxable capital
contribution.
Concurrently with the Mutual Company's capital contribution, the Company
will issue and sell shares of Common Stock to the public in the Offering.
Generally, a sale of shares for cash is a non-taxable event under Section 1032
of the Code. Management is not aware of any authority under current law which
would hold that the two concurrent transactions would be taxable.
There is, however, the possibility that the receipt and/or exercise of the
subscription rights by Eligible Account Holders and Supplemental Eligible
Account Holders could result in taxable gain or income to the extent that such
purchase rights are determined to have a fair market value. See "RISK FACTORS--
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights." Eligible Account Holders and Supplemental Eligible Account Holders are
encouraged to consult with their own tax advisors as to the tax consequences in
the event that such purchase rights are deemed to have ascertainable value.
Certain Restrictions on Purchase or Transfer of Shares After the Offering
All Common Stock purchased in the Offering by a director or an executive
officer of the Bank or the Company and their Associates will be subject to a
restriction that the shares not be sold for a period of one year following the
Offering, except in the event of the death of such director or executive
officer. Each certificate for restricted shares will bear a legend giving
notice of this restriction on transfer, and instructions will be issued to the
effect that any transfer within such time period of any certificate or record
ownership of such shares other than as provided above is a violation of the
restriction. Any shares of Common Stock issued at a later date as a stock
dividend, stock split, or otherwise, with respect to such restricted stock will
be subject to the same restrictions. The directors and executive officers of
the Bank and the Company and certain other persons in receipt of material non-
public information will also be subject to the insider trading rules promulgated
pursuant to the Exchange Act.
Purchases of outstanding shares of Common Stock of the Company by
directors, executive officers (or any person who was an executive officer or
director of the Bank after adoption of the Plan) and their associates during the
three-year period following the Offering may be made only through a broker or
dealer registered with the SEC, except with the prior written approval of the
Department. This restriction does not apply, however, to negotiated transactions
involving more than 1% of the Company's outstanding Common Stock or to the
purchase of stock pursuant to a stock option plan or any tax qualified employee
stock benefit plan of or non-tax qualified employee stock benefit plan of the
Bank or Company (including any employee plan, recognition plan or restricted
stock plan).
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DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue capital stock consisting of 100,000,000
shares of common stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, which may be issued in series and classes having such rights,
preferences, privileges and restrictions as the Company's Board of Directors may
determine. Each share of Common Stock will have the same relative rights as,
and will be identical in all respects with, each other share of Common Stock.
The Board of Directors of the Company is authorized to approve the issuance of
Common Stock up to the amount authorized by the Articles of Incorporation
without the approval of the Company's stockholders. A majority of the issued
and outstanding voting stock of the Company must be held at all time by the
Mutual Company. The Common Stock represents nonwithdrawable capital, is not an
account of an insurable type, and is not insured by the FDIC, the SAIF or any
other government agency. The Common Stock is not guaranteed by the Company or
the Bank. Upon payment of the purchase price for the shares of Common Stock
issued in the Offering, all such shares will be fully-paid, duly issued and
nonassessable.
Common Stock
Voting Rights. The holders of the Common Stock possess exclusive voting
rights in the Company, except to the extent that shares of serial preferred
stock issued in the future may have voting rights. Each holder of the Common
Stock is entitled to one vote for each share held, except that the Articles of
Incorporation eliminates voting rights with respect to those shares that are
beneficially owned by any person in excess of 10% of the Common Stock then
outstanding excluding the Mutual Company and tax-qualified employee benefit
plans. Stockholders will not be permitted to cumulate their votes in the
election of directors.
Dividends. The holders of the Common Stock will be entitled to receive and
to share equally in such dividends as may be declared by the Board of Directors
out of funds legally available therefor.
Liquidation. In the unlikely event of any liquidation, dissolution, or
winding up of the Company, the holders of Common Stock (and the holders of any
class or series of stock entitled to participate with the Common Stock in the
distribution of assets) will be entitled to receive all assets of the Company
available for distribution in cash or in kind after the payment of all debts and
liabilities, the satisfaction of obligations to depositors having an interest in
any liquidation account maintained by the Bank, and the payment of any accrued
dividend claims. If the Company issues preferred stock, the holders thereof may
also have priority over the holders of the Common Stock in the event of
liquidation or dissolution.
Preemptive Rights; Redemption. Holders of the Common Stock will not be
entitled to preemptive rights with respect to any additional shares which may be
issued except that under current Pennsylvania law and policy, persons who are
depositors of the Bank at the time of any subsequent stock offering may be
entitled to receive preemptive rights to purchase stock in such offering. The
Common Stock is not subject to call for redemption. If the Company determined
to issue authorized but unissued shares in the future to persons other than, or
in addition to the existing stockholders, the interests of existing stockholders
would be diluted to the extent of the additional issuance.
Serial Preferred Stock
None of the 10,000,000 authorized shares of serial preferred stock of the
Company will be issued in the Offering. The Board of directors is authorized,
without stockholder approval, to issue serial preferred stock and to fix and
state voting powers, designations, preferences or other special rights of such
shares. If and when issued, the serial preferred stock may rank senior to the
Common Stock as to dividend rights, liquidation preferences, or both, and may
have full, limited or no voting rights. Accordingly, the issuance of preferred
stock could adversely affect the voting and other rights of holders of Common
Stock.
32
<PAGE>
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1997 and for the year then ended, incorporated by reference
in this Prospectus and the Registration Statement, to the extent and for the
period indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
The consolidated financial statements of the Bank and its subsidiaries as
of December 31, 1996 and for the two year period ended December 31, 1996,
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, to the extent and for the period indicated in their report, have been
audited by KPMG Peat Marwick LLP, independent public accountants, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
LEGAL OPINIONS
The legality of the Common Stock will be passed upon for the Company by
Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C., special counsel to
the Company. Certain legal matters will be passed upon for Ryan Beck by Elias,
Matz, Tiernan & Herrick, LLP Washington, D.C.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this
Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1997, filed with the Commission on March 30, 1998.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, filed with the Commission on May 14, 1998.
3. The Company's current reports on Form 8-K filed on March 13, 1998 and
May 7, 1998
All documents filed by the Company subsequent to the date hereof pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to the termination of
the Offering shall be deemed to be incorporated by reference into this
Prospectus and to be a part of the Prospectus from the date of filing thereof.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents incorporated herein by reference (except exhibits
thereto). Such requests, in writing or by telephone, should be directed to:
James L. Durrell, Executive Vice President and Chief Financial Officer, Harris
Financial, Inc., 235 North Second Street Harrisburg, Pennsylvania 17101, (717)
236-4041.
33
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by Harris Financial, Inc. or Harris Savings Bank. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby to any person in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so, or to any person whom it is unlawful
to make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus nor any sale hereunder shall under any circumstances create any
implication that there has been no change in the affairs of Harris Financial,
Inc. or Harris Savings Bank since any of the dates as of which information is
furnished herein or since the date hereof.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION...................................................... 3
SUMMARY.................................................................... 3
SPECIAL CONSIDERATIONS..................................................... 8
HARRIS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OTHER DATA.................................. 10
HARRIS FINANCIAL, INC...................................................... 11
REGULATORY CAPITAL COMPLIANCE.............................................. 11
USE OF PROCEEDS............................................................ 12
CAPITALIZATION............................................................. 13
MARKET INFORMATION......................................................... 14
DIVIDEND POLICY............................................................ 14
PRO FORMA DATA............................................................. 15
THE OFFERING............................................................... 19
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY................................ 29
EXPERTS.................................................................... 30
LEGAL OPINIONS............................................................. 31
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 31
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,000,000 Shares
Harris Financial, Inc.
COMMON STOCK
par value $.01 per share
----------------
PROSPECTUS
----------------
____________, 1998
- --------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<CAPTION>
Amount
------
<S> <C> <C>
* Legal fees and expenses...................... $ 125,000
* Printing and mailing......................... 150,000
* Accounting fees and expenses................. 50,000
** Marketing fees and expenses.................. 1,162,500
* EDGARization fees............................ 20,000
* Data processing fees......................... 30,000
* Filing fees.................................. 25,340
Nasdaq listing fee........................... 17,500
* Other expenses............................... 19,660
----------
* Total........................................ $1,600,000
==========
</TABLE>
- -----------
* Estimated
** The Company has retained Ryan, Beck & Co., Inc. ("Ryan Beck") to assist in
the sale of Common Stock on a best efforts basis. Ryan Beck will be paid a
marketing fee of $50,000 plus a fee of 2% of all Common Stock sold in the
Offering, excluding shares sold to the Company's officers and directors or
employee benefit plans. Includes Ryan Beck's legal fees and legal counsel
expenses of $57,500.
Item 15. Indemnification of Directors and Officers
ARTICLE VI of the Bylaws of Harris Financial, Inc. (the "Corporation")
provides for indemnification of directors and officers of the Company as
follows:
6.1 Third Party Actions. The Corporation shall indemnify any person
-------------------
who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the Corporation), by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request
of the Corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust
or other enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action or proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful,
provided that the Corporation shall not be liable for any amounts which may
be due to any such person in connection with a settlement of any action or
proceeding effected without its prior written consent or any action or
proceeding initiated by any such person (other than an action or proceeding
to enforce rights to indemnification hereunder).
6.2 Derivative and Corporate Actions. The Corporation shall indemnify
--------------------------------
any person who was or is a party, or is threatened to be made a party, to
any threatened, pending or completed action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a representative of another domestic
or foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees) actually and reasonably incurred by him in connection with the
defense or settlement of the action if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, provided that the Corporation shall not be
liable for any amounts which may be due to any such person in connection
with a settlement of any action or proceeding affected without its prior
written consent. Indemnification shall not be made under this Section 6.2
in respect of any claim, issue or matter as to which the person has been
adjudged to be liable to the Corporation unless and only to the extent that
the court of common pleas of the judicial district embracing the county in
which the registered office of the Corporation is located or the court in
which the action was brought determines upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
the person
<PAGE>
is fairly and reasonably entitled to indemnity for the expenses that the
court of common pleas or other court deems proper.
6.3 Mandatory Indemnification. To the extent that a representative of
-------------------------
the Corporation has been successful on the merits or otherwise in defense
of any action or proceeding referred to in Section 6.1 or Section 6.2 or in
defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
6.4 Procedure for Effecting Indemnification. Unless ordered by a
---------------------------------------
court, any indemnification under Section 6.1 or Section 6.2 shall be made
by the Corporation only as authorized in the specific case upon a
determination that indemnification of the representative is proper in the
circumstances because he has met the applicable standard of conduct set
forth in those sections. The determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the action or proceeding;
(2) if such a quorum is not obtainable, or if obtainable and a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
(3) by the stockholders.
6.5 Advancing Expenses. Expenses (including attorneys' fees) incurred
------------------
in defending any action or proceeding referred to in this Article VI shall
be paid by the Corporation in advance of the final disposition of the
action or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined that
he is not entitled to be indemnified by the Corporation as authorized in
this Article VI or otherwise.
6.6 Insurance. The Corporation shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was a representative
of the Corporation or is or was serving at the request of the Corporation
as a representative of another domestic or foreign corporation for profit
or not-for-profit, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against that liability
under the provisions of this Article VI.
6.7 Modification. The duties of the Corporation to indemnify and to
------------
advance expenses to a director or officer provided in this Article VI shall
be in the nature of a contract between the Corporation and each such
person, and no amendment or repeal of any provision of this Article VI
shall alter, to the detriment of such person, the right of such person to
the advance of expenses or indemnification related to a claim based on an
act or failure to act which took place prior to such amendment or repeal.
ARTICLE VIII of the Corporation's Articles of Incorporation provides for
the limitation of liability of directors and officers of the Company as follows:
A. Personal Liability for Monetary Damages. The personal
liabilities of the directors and officers of the Corporation for monetary
damages for conduct in their capacities as such shall be eliminated to the
fullest extent permitted by the BCL as it exists on the effective date of
these Articles of Incorporation or as such law may be thereafter in effect,
and in no event shall a director be personally liable, as such, for
monetary damages for any action taken unless the director has breached or
failed to perform the duties of his office under the BCL and the breach or
failure to perform constitutes self-dealing, willful misconduct or
recklessness. This section A of Article VIII shall not apply to the
responsibility or liability of a director pursuant to any criminal statute,
or the liability of a director for the payment of taxes pursuant to
Federal, State, or local law.
B. Amendments. No amendment, modification or repeal of this Article
VIII, nor the adoption of a provision of these Articles of Incorporation
inconsistent with this Article VIII, shall adversely affect the rights
provided hereby with respect to any claim, issue or matter in any
proceeding that is based in any respect on any alleged action or failure to
act prior to such amendment, modification, repeal or adoption.
<PAGE>
Item 16. Exhibits and Financial Statement Schedules:
The exhibits and financial statement schedules filed as part of this
registration statement are as follows:
(a) List of Exhibits
The list of exhibits immediately precedes the exhibits filed as part
of this registration statement.
(b) Financial Statement Schedules
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to include any additional or changed material
information on the plan of distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering;
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering;
(4) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities therein,
and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest
annual report. to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such
interim financial information;
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrants pursuant to the
foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the
Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the questions whether such
indemnification by
<PAGE>
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue;
(7)(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the
Registrants pursuant to Rule 424 (b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared
effective;
(7)(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, Harris
Financial, Inc. certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Harrisburg, Pennsylvania, on the 25th day of June, 1998.
HARRIS FINANCIAL, INC.
By: /s/ Charles C. Pearson, Jr.
----------------------------------------
Charles C. Pearson, Jr., President and
Chief Executive Officer
We, the undersigned Directors of Harris Financial, Inc. (the "Company")
hereby severally constitute and appoint Charles C. Pearson, Jr. as our true and
lawful attorney and agent, to do any and all things in our names in the
capacities indicated below which said Charles C. Pearson, Jr. may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1933,
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the registration statement on Form S-3 relating
to the offering of the Company's Common Securities, including specifically, but
not limited to, power and authority to sign for us in our names in the
capacities indicated below the registration statement and any and all amendments
(including post-effective amendments) thereto; and we hereby approve, ratify and
confirm all that said Charles C. Pearson, Jr. shall do or cause to be done by
virtue thereof.
HARRIS FINANCIAL, INC.
<TABLE>
<S> <C>
By: /s/ Charles C. Pearson, Jr. By: /s/ James L. Durrell
------------------------------------------- --------------------------------------------
Charles C. Pearson, Jr., President, Chief James L. Durrell, Executive Vice
Executive Officer and Director President and Chief Financial Officer
(Principal Executive Officer) (Principal Financial and Accounting Officer)
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Ernest P. Davis By: /s/ Jimmie C. George
------------------------------------------- --------------------------------------------
Ernest P. Davis, Director Jimmie C. George, Director
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Robert A. Houck By: /s/ Bruce S. Isaacman
------------------------------------------- --------------------------------------------
Robert A. Houck, Director Bruce S. Isaacman, Director
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Robert E. Kessler By: /s/ William E. McClure, Jr.
------------------------------------------- --------------------------------------------
Robert E. Kessler, Director William E. McClure, Jr., Director
Date: June 25, 1998 Date: June 25, 1998
By: /s/ William A. Siverling By: /s/ Frank R. Sourbeer
------------------------------------------- --------------------------------------------
William A. Siverling, Director Frank R. Sourbeer, Director
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Donald B. Springer
-------------------------------------------
Donald B. Springer, Director
Date: June 25, 1998
</TABLE>
<PAGE>
As filed with the Securities and Exchange Commission on June 30, 1998
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
EXHIBITS
TO
REGISTRATION STATEMENT
ON
FORM S-3
-----------------
HARRIS FINANCIAL, INC.
================================================================================
<PAGE>
EXHIBIT INDEX
1 Agency Agreement with Ryan Beck***
2 Stock Issuance Plan
4 Form of Common Stock of Harris Financial, Inc.*
5.1 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. as to the legality
of the securities being issued.
5.2 Draft Fairness Opinion from Ryan Beck***
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (set forth in
Exhibit 5.1)
23.3 Consent of Arthur Anderson LLP
24 Power of attorney (set forth on the signature pages to this Registration
Statement)
27 Financial Data Schedules**
99.1 Stock Order Form***
- -------------
* Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-22415) previously filed with the Securities and
Exchange Commission on February 26, 1997, as amended March 17, 1997.
** Previously filed with the Securities and Exchange Commission on March 30,
1998 and May 14, 1998. Such documents are incorporated herein by reference
pursuant to Rule 601 of Regulation S-K.
*** To be filed supplementally or by amendment.
<PAGE>
Exhibit 2
HARRIS FINANCIAL, INC
STOCK ISSUANCE PLAN
<PAGE>
TABLE OF CONTENTS
1. Introduction - Business Purpose.....................................1
2. Definitions.........................................................2
3. The Offering........................................................6
4. Conditions to Completion of the Offering............................7
5. Timing of the Sale of Capital Stock.................................8
6. Rights of Depositors to Receive Prospectuses........................8
7. Number of Shares to be Offered......................................8
8. Purchase Price of Shares............................................8
9. Method of Offering Shares and Rights to Purchase Stock..............9
10. Additional Limitations on Purchases of Common Stock................12
11. Payment for Stock..................................................14
12. Manner of Exercising Subscription Rights Through Order Forms.......15
13. Undelivered, Defective or Late Order Form; Insufficient Payment....16
14. Completion of the Offering.........................................16
15. Market for Common Stock............................................17
16. Stock Purchases by Management Persons After the Offering...........17
17. Resales of Stock by Management Persons.............................17
18. Stock Certificates.................................................17
19. Restriction on Financing Stock Purchases...........................17
20. Stock Benefit Plans................................................17
21. Post-Reorganization Filing and Market Making.......................18
22. Payment of Dividends and Repurchase of Stock.......................18
23. Interpretation.....................................................18
24. Amendment or Termination of the Plan...............................19
<PAGE>
1. Introduction - Business Purpose
In January 1994, Harris Savings Bank was reorganized (the "Reorganization")
from a Pennsylvania chartered mutual savings bank to a Pennsylvania chartered
mutual holding company, Harris Financial, MHC (the "Mutual Company") pursuant to
a Plan of Reorganization that was approved by the Bank's depositors and the
Pennsylvania Department of Banking. As part of the Reorganization, a
Pennsylvania chartered capital stock savings bank, Harris Savings Bank (the
"Bank") was organized to become a majority-owned subsidiary of the Mutual
Company. The Mutual Company transferred substantially all of its assets, and all
of its liabilities to the new stock Bank in exchange for 25,500,000 shares (as
adjusted for a 1997 three-for-one stock split) of the Bank's common stock. The
Plan of Reorganization requires the Mutual Company to own a majority of the
outstanding shares of common stock, but authorized one or more minority stock
offerings. At the time and as part of the Reorganization, the Bank conducted a
minority stock offering in which it sold 7,875,000 shares (as adjusted) of
common stock to its customers and employee benefit plans. At the conclusion of
the Reorganization, the Mutual Company owned 76.4% of the Bank's outstanding
shares of common stock and stockholders other than the Mutual Company owned
23.6%.
The Bank formed Harris Financial, Inc., (the "Company") a Pennsylvania
corporation, to become the stock holding company of the Bank in a transaction
(the "Two-Tier Reorganization") that was completed in September 1997. In the
Two-Tier Reorganization, each share of the Bank's common stock was converted
into and became a share of common stock of the Company ("Common Stock"), and the
Bank became a wholly-owned subsidiary of the Company. The Mutual Company, which
owned a majority of the Bank's outstanding shares of common stock immediately
prior to completion of the Two-Tier Reorganization, became the owner of the same
percentage of the outstanding shares of Common Stock of the Company immediately
following the completion of the Two-Tier Reorganization.
On June 16, 1998, the Board of Directors of the Company adopted this Plan
of Stock Issuance (the "Plan") pursuant to which the Company proposes to offer
additional shares of Common Stock to certain of the Bank's depositors, the
public, and the Bank's employee stock ownership plan. On the same date the Plan
was ratified by the Board of Trustees of the Mutual Company and the Board of
Directors of the Bank.
In adopting the Plan, the Company's Board of Directors determined that the
Plan is advisable and in the best interest of the Company's stockholders and in
the best interests of the Company's stockholders other than the Mutual Company.
In ratifying the Plan, the Mutual Company's Board of Trustees determined that
the Plan is advisable and in the best interest of the Mutual Company and the
Bank's depositors. The offering pursuant to the Plan will add financial strength
to the consolidated Company, thereby enhancing the value of the Mutual Company's
primary asset. The increase in the Company's capital will increase the Company's
ability to serve as a source of strength to the Bank, and the increase in the
Company's and the Bank's capital will provide additional protection to the
Bank's depositors. Certain of the Bank's depositors will be given subscription
rights to purchase the Common Stock issued pursuant to the Plan. Although the
Mutual Company's contribution of shares of Common Stock to the Company will
decrease the percentage
<PAGE>
of the Company owned by the Mutual Company, it will increase the aggregate book
value of the shares of Common Stock held by the Mutual Company and will only
slightly (or not at all) decrease the aggregate earnings attributable to the
shares of Common Stock held by the Mutual Company. The Offering does not
preclude the Mutual Company from conducting a mutual-to-stock conversion in the
future.
2. Definitions
As used in this Plan, the terms set forth below have the following
meanings:
Acting in Concert: Means (i) knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; (ii) a combination or pooling of votes or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise; or (iii) a person or company which acts in concert
with another person or company ("other party") shall also be deemed to be acting
in concert with any person or company who is also acting in concert with the
other party, except that any Tax-Qualified Employee Benefit Plan or Non-Tax-
Qualified Employee Benefit Plan will not be deemed to be acting in concert with
any other Tax-Qualified Employee Benefit Plan or Non-Tax-Qualified Employee
Benefit Plan or with its trustee or a person who serves in a similar capacity
solely for the purpose of determining whether stock held by the trustee and
stock held by the plan will be aggregated. The determination of whether a group
is acting in concert shall be made solely by the Board of Directors of the
Company or officers delegated by such Board, and may be based on any evidence
upon which the Board or such delegatee chooses to rely.
Actual Purchase Price: The price per share, determined as provided in this
Plan, at which the Common Stock is actually sold at the conclusion of the
Offering.
Affiliate: Any Person that controls, is controlled by, or is under common
control with another person.
Associate: The term "Associate," when used to indicate a relationship with
any Person, means: (i) any corporation or organization (other than the Bank,
the Company, the Mutual Company or a majority-owned subsidiary of any thereof)
of which such Person is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity; (iii) any relative or spouse of such Person or
any relative of such spouse, who has the same home as such Person or who is a
director, trustees, or officer of the Bank, the Mutual Company, the Company or
any subsidiary of the Mutual Company or the Company or any affiliate thereof;
and (iv) any person acting in concert with any of the persons or entities
specified in clauses (i) through (iii) above; provided, however, that any Tax-
Qualified or Non-Tax-Qualified Employee Plan shall not be deemed to be an
associate of any trustee, director or officer of the Mutual Company, the Company
or the Bank, to the extent provided
2
<PAGE>
in Section 9 hereof. When used to refer to a Person other than an officer or
director of the Bank, the Bank in its sole discretion may determine the Persons
that are Associates of other Persons.
Bank: Harris Savings Bank.
Banking Law: The Banking Law of the state of Pennsylvania.
BHCA: The Bank Holding Company Act of 1956, as amended.
Capital Stock: Any and all authorized stock of the Bank or the Company.
Commissioner: The Commissioner of the Pennsylvania Department of Banking.
Common Stock: Common Stock, par value $.01, of the Company.
Community: Each Pennsylvania and Maryland county in which the Bank
maintains a full-service office, including the Pennsylvania counties of Dauphin,
Cumberland, York, Lancaster and Lebanon, and the Maryland county of Washington.
Community Offering: The offering to certain members of the general public
of any shares for which subscriptions have not been accepted in the Subscription
Offering. The Community Offering may include a syndicated community offering and
may be followed by a public offering.
Company: Harris Financial, Inc.
Department: The Pennsylvania Department of Banking.
Deposit Account(s): All withdrawable deposits of the Bank including,
without limitation, savings, time, demand, NOW accounts, money market,
certificate and passbook accounts.
Effective Date: The date of the consummation of the Offering.
Eligibility Record Date: May 31, 1997, the date for determining the
depositors that qualify as an Eligible Account Holder.
Eligible Account Holder: Any depositor holding a Qualifying Deposit on the
Eligibility Record Date.
ESOP: The Bank's employee stock ownership plan.
Exchange Act: The Securities Exchange Act of 1934, as amended.
FDIC: The Federal Deposit Insurance Corporation.
3
<PAGE>
FRB: The Board of Governors of the Federal Reserve System.
FRB Application: The application to be submitted to obtain FRB approval of
the Offering.
Management Person: Any Officer or Director of the Bank or the Company or
any Affiliate of the Bank or the Company, and any person acting in concert with
any such Officer or Director.
Market Maker: A dealer (i.e., any person who engages directly or indirectly
as agent, broker, or principal in the business of offering, buying, selling or
otherwise dealing or trading in securities issued by another person) who, with
respect to a particular security, (i) regularly publishes bona fide competitive
bid and offer quotations on request, and (ii) is ready, willing and able to
effect transactions in reasonable quantities at the dealer's quoted prices with
other brokers or dealers.
Marketing Agent: The broker-dealer responsible for organizing and managing
the Offering and sale of the Common Stock.
Minority Ownership Interest: The outstanding shares of Common Stock,
expressed as a percentage, owned by persons other than the Mutual Company.
Minority Stockholder: Any owner of Common Stock, other than the Mutual
Company.
Mutual Company: Harris Financial, MHC.
Non-Voting Stock: Any Capital Stock other than Voting Stock.
Offering: The offering of Common Stock in a Subscription Offering and, to
the extent shares remain available, in a Community Offering.
Offering Price Range: The per share price range of Common Stock established
by the Company prior to the commencement of the Offering.
Officer: An executive officer of the Company or the Bank, including the
Chief Executive Officer, President, Executive Vice President, Senior Vice
Presidents, Vice Presidents in charge of principal business functions,
Secretary, Treasurer and any other employee participating in major policy making
functions of the institution.
Parent: A company that controls another company, either directly or
indirectly through one or more subsidiaries.
Person: An individual, corporation, partnership, association, joint-stock
company, trust (including Individual Retirement Accounts and KEOGH Accounts),
unincorporated organization, government entity or political subdivision thereof
or any other entity.
Plan: This Stock Issuance Plan.
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Qualifying Deposit: The aggregate of one or more Deposit Accounts with an
aggregate balance of $50 or more as of the close of business on the Eligibility
Record Date or as of the close of business on the Supplemental Eligibility
Record Date, as the case may be. Deposit Accounts with aggregate total deposit
balances of less than $50 shall not constitute a Qualifying Deposit.
Reorganization: The 1994 reorganization of the Bank into the mutual holding
company structure.
Resident: The terms "resident" "residence," "reside," or "residing" as used
herein with respect to any Person shall mean any Person who occupies a dwelling
within the Community, has an intent to remain with the Community for a period of
time, and manifests the genuineness of that intent by establishing an ongoing
physical presence within the Community together with an indication that such
presence within the Community is something other than merely transitory in
nature. To the extent the Person is a corporation or other business entity, the
principal place of business or headquarters shall be in the Community. To the
extent a person is a personal benefit plan, the circumstances of the beneficiary
shall apply with respect to this definition. In the case of all other benefit
plans, the circumstances of the trustee shall be examined for purposes of this
definition. The Company may utilize deposit or loan records or such other
evidence provided to it to make a determination as to whether a Person is a
resident. In all cases, however, such a determination shall be in the sole
discretion of the Company.
SEC: The Securities and Exchange Commission.
Subscription Offering: The offering of Common Stock of the Company to
Eligible Account Holders, Tax-Qualified Plans and Supplemental Eligible Account
Holders.
Subsidiary: A company that is controlled by another company, either
directly or indirectly through one or more subsidiaries.
Supplemental Eligibility Record Date: The record date for determining who
qualifies as a Supplemental Eligible Account Holder. The Supplemental
Eligibility Record Date shall be the last day of the calendar quarter preceding
the Department's approval of the Plan and/or the Offering.
Supplemental Eligible Account Holder: Any Person holding a Qualifying
Deposit on the Supplemental Eligibility Record Date, who is not an Eligible
Account Holder, a Tax-Qualified Employee Plan or an Officer or Director of the
Bank.
Syndicated Community Offering: At the discretion of the Company, the
offering of Common Stock following or contemporaneously with the Community
Offering through a syndicate of broker-dealers.
Tax-Qualified Employee Plan: Any defined benefit plan or defined
contribution plan (including any employee stock ownership plan, stock bonus
plan, profit-sharing plan, or other plan) of the Bank, the Company, the Mutual
Company or any of their affiliates, which, with its related
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trusts, meets the requirements to be qualified under Section 401 of the Internal
Revenue Code. The term Non-Tax-Qualified Employee Benefit Plan means any defined
benefit plan or defined contribution plan which is not so qualified.
Voting Stock:
(1) Voting Stock means common stock or preferred stock, or similar
interests if the shares by statute, charter or in any manner, entitle the
holder: (i) To vote for or to select directors of the Bank or the Company; and
(ii) To vote on or to direct the conduct of the operations or other significant
policies of the Bank or the Company.
(2) Notwithstanding anything in paragraph (1) above, preferred stock is not
"Voting Stock" if: (i) Voting rights associated with the preferred stock are
limited solely to the type customarily provided by statute with regard to
matters that would significantly and adversely affect the rights or preferences
of the preferred stock, such as the issuance of additional amounts or classes of
senior securities, the modification of the terms of the preferred stock, the
dissolution of the Bank or the Company, or the payment of dividends by the Bank
or the Company when preferred dividends are in arrears; (ii) The preferred stock
represents an essentially passive investment or financing device and does not
otherwise provide the holder with control over the issuer; and (iii) The
preferred stock does not at the time entitle the holder, by statute, charter, or
otherwise, to select or to vote for the selection of directors of the Bank or
the Company.
(3) Notwithstanding anything in paragraphs (1) and (2) above, "Voting
Stock" shall be deemed to include preferred stock and other securities that,
upon transfer or otherwise, are convertible into Voting Stock or exercisable to
acquire Voting Stock where the holder of the stock, convertible security or
right to acquire Voting Stock has the preponderant economic risk in the
underlying Voting Stock. Securities immediately convertible into Voting Stock at
the option of the holder without payment of additional consideration shall be
deemed to constitute the Voting Stock into which they are convertible; other
convertible securities and rights to acquire Voting Stock shall not be deemed to
vest the holder with the preponderant economic risk in the underlying Voting
Stock if the holder has paid less than 50% of the consideration required to
directly acquire the Voting Stock and has no other economic interest in the
underlying Voting Stock.
3. The Offering
The Company is offering additional shares of its Common Stock to the public
such that its Minority Ownership Interest would be increased to up to a maximum
of 49.9%, including any shares underlying options outstanding as of the
completion of the Offering. Pursuant to the terms set forth herein, the Company
will offer shares of Common Stock to Eligible Account Holders, the Employee
Plans and Supplemental Eligible Account Holders in the respective priorities set
forth in this Plan (the "Offering"). Any shares of Common Stock not subscribed
for by the foregoing classes of persons may be offered for sale to certain
members of the general public, with preference first given to Minority
Stockholders as of a specified date and then to natural persons residing in the
Community, and/or in a Syndicated Community Offering or through an underwritten
firm
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commitment public offering, or through a combination thereof. The Offering will
result in the Minority Ownership Interest increasing to a maximum of 49.9%, and
the Mutual Company's ownership interest in the Company decreasing to a minimum
of 50.1%. The Offering will have no impact on depositors, borrowers or other
customers of the Bank. The Bank will continue to be a member of the Federal Home
Loan Bank System and all its insured savings deposits will continue to be
insured by the Federal Deposit Insurance Corporation ("FDIC") to the extent
provided by applicable law.
The Offering would be effected as follows, or in any other manner approved
by the Department that results in immaterial adverse tax accounting
consequences. The choice of the method that will be used will be made by the
Board of Directors of the Company prior to conclusion of the Offering. Each of
the steps shall be deemed to occur in such order as is necessary to consummate
the Offering pursuant to the Plan and the intent of the Board of Directors of
the Company.
1. All shares sold in the Offering will be issued by the Company from
authorized but unissued shares.
2. The Company would offer for sale in the Offering the newly issued
shares on a priority basis, as set forth in the Plan.
3. Prior to consummation of the Offering, the Mutual Company, as the
majority stockholder of the Company, in the interest of increasing the
value of the Company, while not materially diluting the value of the
Common Stock, will make a capital contribution to the Company of
shares of Common Stock held by the Mutual Company, in an amount equal
to the number of shares sold in the Offering but in no event in an
amount that would reduce the Mutual Company's ownership interest in
the Company to less that 50.1%.
4. The Company would cancel the shares contributed to it by the Mutual
Company, so as to lessen the dilutive effect of the new issuance.
Expenses incurred in connection with the Offering should be reasonable.
4. Conditions to Completion of the Offering
Consummation of the Offering is conditioned upon the following:
A. Approval of the Plan by a majority of the Board of Directors of the
Company.
B. Ratification of the Plan by a majority of the Board of Trustees of the
Mutual Company and a majority of the Board of Directors of the Bank.
C. Receipt of any required approvals from the Department.
D. Receipt of any required approvals from the FRB.
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E. The sale of the minimum number of shares offered for sale in the
Offering.
5. Timing of the Sale of Capital Stock
The Bank intends to consummate the Offering as soon as feasible following
the receipt of all approvals required by the Plan.
6. Rights of Depositors to Receive Prospectuses
The Company shall not be required to send a prospectus and stock order form
to all Eligible Account Holders or Supplemental Eligible Account Holders, but
may in lieu thereof send a postage prepaid card that permits such depositors to
request a copy of the prospectus and stock order form. The Company may require
that the postage pre-paid card be returned to the Company or the Bank by a
reasonable date certain. If such cards are not timely returned, then at the
discretion of the Company the subscription rights of such persons shall lapse,
and the Company shall not be required to forward a copy of the prospectus and
stock order form to such depositors.
7. Number of Shares to be Offered
The total number of shares (or range thereof) of Common Stock to be offered
for sale pursuant to the Plan shall be determined initially by the Boards of
Directors of the Company and the Bank and the Board of Trustees of the Mutual
Company in conjunction with the Marketing Agent, based upon pro forma
information prepared by the Marketing Agent. The total number of shares of
Common Stock that may be owned by persons other than the Mutual Company at the
close of the Offering must be less than 50% of the issued and outstanding shares
of Common Stock.
8. Purchase Price of Shares
An Offering Price Range shall be established by the Company and the Mutual
Company prior to commencement of the Subscription and Community Offerings. Such
range shall be determined by the Company and the Mutual Company on the basis of
relevant market factors and upon the advice of the Marketing Agent. All shares
of Common Stock sold in the Offering shall be sold at a uniform fixed price per
share, referred to herein as the Actual Purchase Price. The Actual Purchase
Price shall be determined by the Board of Directors of the Company, in
conjunction with the Marketing Agent, immediately prior to the Effective Date.
The Marketing Agent shall provide an opinion to the Company and the Mutual
Company that the price is fair from a financial point of view to (i) the Mutual
Company and the Bank's depositors, and (ii) stockholders of the Company
including stockholders other than the Mutual Company.
If there is a Syndicated Community Offering of shares of Common Stock not
subscribed for in the Subscription and Community Offerings, the price per share
at which the Common Stock is sold in such Syndicated Community Offering shall
not be greater than the maximum nor less than
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<PAGE>
the minimum of the Offering Price Range as determined by the Company and the
Mutual Company subject to approval by the Department. Upon consummation of the
sale in the Syndicated Community Offering of the shares of Common Stock
unsubscribed for in the Subscription and Community Offerings, the price at which
the shares are sold in the Syndicated Community Offering shall also be the
Actual Purchase Price paid for all shares of Common Stock in the Subscription,
Community and Syndicated Community Offerings.
The Common Stock to be issued in the Offering shall be fully paid and
nonassessable.
9. Method of Offering Shares and Rights to Purchase Stock
In descending order of priority, the opportunity to purchase Common Stock
shall be given in the Subscription Offering to: (1) Eligible Account Holders;
(2) Tax-Qualified Employee Plans; and (3) Supplemental Eligible Account Holders.
Any shares of Common Stock that are not subscribed for in the Subscription
Offering may be offered for sale in a Community Offering. The minimum purchase
by any Person shall be $500 of Common Stock. The Company may use its discretion
in determining whether prospective purchasers are "Residents," "Associates," or
"Acting in Concert," and in interpreting any and all other provisions of the
Plan. All such determinations are in the sole discretion of the Company, and may
be based on whatever evidence the Company chooses to use in making any such
determination.
In addition to the priorities set forth below, the Board of Directors may
establish other priorities for the purchase of Common Stock, subject to the
approval of the Department and the FRB, and may change the order of priorities
set forth below if required by the FRB or the Department. The priorities for the
purchase of shares in the Offering are as follows:
A. Subscription Offering
Priority 1: Eligible Account Holders. Each Eligible Account Holder shall
receive non-transferrable subscription rights to subscribe for shares of Common
Stock offered in the Offering in an amount equal to the greater of $250,000,
one-tenth of one percent (.10%) of the total shares offered in the Offering, or
15 times the product (rounded down to the nearest whole number) obtained by
multiplying the total number of shares of Common Stock to be issued in the
Offering by a fraction, of which the numerator is the Qualifying Deposit of the
Eligible Account Holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders. If there are insufficient shares
available to satisfy all subscriptions of Eligible Account Holders, shares will
be allocated to Eligible Account Holders so as to permit each such subscribing
Eligible Account Holder to purchase a number of shares sufficient to make his
total allocation equal to the lesser of 100 shares or the number of shares
subscribed for. Thereafter, unallocated shares will be allocated pro rata to
remaining subscribing Eligible Account Holders whose subscriptions remain
unfilled in the same proportion that each such subscriber's Qualifying Deposit
bears to the total amount of Qualifying Deposits of all subscribing Eligible
Account Holders whose subscriptions remain unfilled. Subscription rights to
purchase Common Stock received by Officers and Directors of the
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Company and the Bank including associates of Officers and Directors, based on
their increased deposits in the Bank in the one year preceding the Eligibility
Record Date, shall be subordinated to the subscription rights of other Eligible
Account Holders. To ensure proper allocation of stock, each Eligible Account
Holder must list on his or her subscription order form all Deposit Accounts in
which he had an ownership interest as of the Eligibility Record Date.
Priority 2: Tax-Qualified Employee Plans. The Tax-Qualified Employee Plans
shall be given the opportunity to purchase in the aggregate up to 10% of the
Common Stock issued in the Offering. In the event of an oversubscription in the
Offering, subscriptions for shares by the Tax-Qualified Employee Plans may be
satisfied, in whole or in part, through open market purchases by the Tax-
Qualified Employee Plans subsequent to the closing of the Offering.
Priority 3: Supplemental Eligible Account Holders. To the extent there
are sufficient shares remaining after satisfaction of subscriptions by Eligible
Account Holders and the Tax-Qualified Employee Plans, each Supplemental Eligible
Account Holder shall receive non-transferable subscription rights to subscribe
for shares of Common Stock offered in the Offering in an amount equal to the
greater of $250,000, one-tenth of one percent (.10%) of the total shares offered
in the Offering, or 15 times the product (rounded down to the nearest whole
number) obtained by multiplying the total number of shares of Common Stock to be
issued in the Offering by a fraction, of which the numerator is the Qualifying
Deposit of the Supplemental Eligible Account Holder and the denominator is the
total amount of Qualifying Deposits of all Supplemental Eligible Account
Holders. In the event Supplemental Eligible Account Holders subscribe for a
number of shares which, when added to the shares subscribed for by Eligible
Account Holders and the Tax-Qualified Employee Plans, exceed available shares,
the available shares of Common Stock will be allocated among subscribing
Supplemental Eligible Account Holders so as to permit each subscribing
Supplemental Eligible Account Holder to purchase a number of shares sufficient
to make his total allocation equal to the lesser of 100 shares or the number of
shares subscribed for. Thereafter, unallocated shares will be allocated to each
subscribing Supplemental Eligible Account Holder whose subscription remains
unfilled in the same proportion that such subscriber's Qualifying Deposits on
the Supplemental Eligibility Record Date bear to the total amount of Qualifying
Deposits of all subscribing Supplemental Eligible Account Holders whose
subscriptions remain unfilled.
B. Community Offering/Public Offering
Any shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in a Community Offering. This will involve an offering
of all unsubscribed shares directly to the general public with a preference
given to Minority Stockholders and then to those natural persons who are
residents of the Community. The Community Offering, if any, shall be for a
period of not more than 45 days unless extended by the Company and the Bank, and
shall commence concurrently with, during or promptly after the Subscription
Offering. The Company and the Bank may use an investment banking firm or firms
on a best efforts basis to sell the unsubscribed shares in the Subscription and
Community Offering. The Company and the Bank may pay a commission
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or other fee to such investment banking firm or firms as to the shares sold by
such firm or firms in the Subscription and Community Offering and may also
reimburse such firm or firms for expenses incurred in connection with the sale.
The Community Offering may include a syndicated community offering managed by
such investment banking firm or firms. No Person, by himself or herself, or with
an Associate or group of Persons acting in concert, may subscribe for or
purchase more than $500,000 of Common Stock offered in the Community Offering.
Further, the Company may limit total subscriptions under this Subsection so as
to assure that the number of shares available for the public offering may be up
to a specified percentage of the number of shares of Common Stock. Finally, the
Company may reserve shares offered in the Community Offering for sales to
institutional investors.
In the event of an oversubscription for shares in the Community Offering,
shares may be allocated (to the extent shares remain available) first to cover
any reservation of shares for a public offering or institutional orders, next to
cover orders of Minority Stockholders, next to cover orders of natural persons
residing in the Community, then to cover the orders of any other person
subscribing for shares in the Community Offering so that each person in such
category of the Community Offering may receive 1,000 shares, and thereafter, on
a pro rata basis to persons in such category of the Community Offering based on
the amount of their respective subscriptions.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any Person under this
Subsection.
Any shares of Common Stock not sold in the Subscription Offering or in the
Community Offering, if any, shall then be sold to the underwriters for resale to
the general public in a public offering. It is expected that the public offering
will commence as soon as practicable after termination of the Subscription
Offering and the Community Offering, if any. The public offering shall be
completed within 45 days after the termination of the Subscription Offering,
unless such period is extended as provided herein. The public offering price and
the underwriting discount shall be determined by an underwriting agreement
between the Company and the underwriters.
If for any reason a public offering of unsubscribed shares of Common Stock
is not advisable or cannot be effected and any shares remain unsold after the
Subscription Offering and the Community Offering, if any, the Boards of
Directors of the Company will seek to make other arrangements for the sale of
the remaining shares. Such other arrangements will be subject to the approval of
the Department and, if necessary, the FRB, and to compliance with applicable
securities laws.
Depending upon market and financial conditions, the Board of Directors of
the Company with the approval of the Department, if required, may increase or
decrease any of the purchase limitations set forth in this Subsection.
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10. Additional Limitations on Purchases of Common Stock
Purchases of Common Stock in the Offering will be subject to the following
purchase limitations:
(1) The aggregate amount of outstanding Common Stock owned or controlled
by persons other than Mutual Company at the close of the Offering
shall be less than 50% of the Company's total outstanding Common
Stock.
(2) No Eligible Account Holder or Supplemental Eligible Account Holder may
in their capacities as such purchase in the Subscription Offering more
than $250,000 of Common Stock, and no Person, Associate thereof, or
group of persons acting in concert, may purchase more than $500,000 of
Common Stock offered in the Offering, except that: (i) the Company
may, in its sole discretion and without further notice to or
solicitation of subscribers or other prospective purchasers, increase
such maximum purchase limitations up to 5% of the number of shares
offered in the Offering; (ii) Tax-Qualified Employee Plans may
purchase up to 10% of the shares offered in the Offering; and (iii)
for purposes of this Subsection shares to be held by any Tax-Qualified
Employee Plan and attributable to a Person shall not be aggregated
with other shares purchased directly by or otherwise attributable to
such Person.
(3) The aggregate amount of Common Stock acquired in the Offering, plus
all prior issuances by the Bank or the Company, by all Non-Tax-
Qualified Employee Plans or Management Persons and their Associates,
exclusive of any Common Stock acquired by such persons in the
secondary market, shall not exceed 25% of the outstanding shares of
Common Stock held by persons other than the Mutual Company at the
conclusion of the Offering. In calculating the number of shares held
by Management Persons and their Associates under this paragraph,
shares held by any Tax-Qualified Employee Plans or Non-Tax-Qualified
Employee Plans of the Company or the Bank that are attributable to
such persons shall not be counted.
(4) The aggregate amount of Common Stock acquired in the Offering, plus
all prior issuances by the Bank and the Company, by all Non-Tax-
Qualified Employee Plans or Management Persons and their Associates,
exclusive of any Common Stock acquired by such plans or persons in the
secondary market, shall not exceed 25% of the stockholders' equity of
the Company at the close of the Offering. In calculating the number of
shares held by Management Persons and their Associates under this
paragraph, shares held by any Tax-Qualified Employee Plans or Non-Tax-
Qualified Employee Plans of the Company or the Bank that are
attributable to such persons shall not be counted.
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(5) The aggregate amount of Common Stock acquired in the Offering, plus
all prior issuances by the Bank or the Company, by any Non-Tax-
Qualified Employee Plan of the Company or the Bank or Management
Person and their Associates, exclusive of any shares of Common Stock
acquired by such plan or persons in the secondary market, shall not
exceed 10% of the outstanding shares of Common Stock held by persons
other than the Mutual Company at the conclusion of the Offering. In
calculating the number of shares held by Management Persons and their
Associates under this paragraph, shares held by any Tax-Qualified
Employee Plans and Non-Tax-Qualified Employee Plans of the Company or
the Bank that are attributable to such persons shall not be counted.
(6) The aggregate amount of Common Stock acquired in the Offering, plus
all prior issuances by the Bank or the Company, by any Non-Tax-
Qualified Employee Plan of the Company or the Bank or Management
Person and their Associates, exclusive of any shares of Common Stock
acquired by such plan or persons in the secondary market, shall not
exceed 10% of the stockholders' equity of the Company held by persons
other than the Mutual Company at the conclusion of the Offering.
(7) The aggregate amount of Common Stock acquired in the Offering, plus
all prior issuances by the Bank or the Company, by any Tax-Qualified
Employee Plan of the Company, exclusive of any shares of Common Stock
acquired by such plans in the secondary market, shall not exceed 10%
of the outstanding Common Stock held by persons other than the Mutual
Company at the conclusion of the Offering.
(8) The aggregate amount of Common Stock acquired in the Offering, plus
all prior issuances by the Bank or the Company, by any Tax-Qualified
Employee Plan of the Company, exclusive of any shares of Common Stock
acquired by such plans in the secondary market, shall not exceed 10%
of the stockholders' equity of the Company held by persons other than
the Mutual Company at the conclusion of the Offering.
(9) Notwithstanding any other provision of this Plan, no person shall be
entitled to purchase any Common Stock to the extent such purchase
would be illegal under any federal law or state law or regulation or
would violate regulations or policies of the National Association of
Securities Dealers, Inc., particularly those regarding free riding and
withholding. The Company and/or its agents may ask for an acceptable
legal opinion from any purchaser as to the legality of such purchase
and may refuse to honor any purchase order if such opinion is not
timely furnished.
(10) The Board of Directors of the Company has the right in its sole
discretion to reject any order submitted by a person whose
representations the Board of Directors believes to be false or who it
otherwise believes, either alone or acting in concert with others, is
violating, circumventing, or intends to violate, evade or circumvent
the terms and conditions of this Plan.
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(11) The Company will make reasonable efforts to comply with the securities
laws of all states in the United States in which persons entitled to
subscribe for Common Stock pursuant to the Plan reside. However, the
Company and the Bank are not required to offer Common Stock to any
person who resides in a foreign country.
Prior to the consummation of the Offering, no Person shall offer to
transfer, or enter into any agreement or understanding to transfer the legal or
beneficial ownership of any subscription rights or shares of Common Stock,
except pursuant to this Plan.
EACH PERSON PURCHASING COMMON STOCK IN THE STOCK OFFERING WILL BE DEEMED TO
CONFIRM THAT SUCH PURCHASE DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS IN
THIS PLAN. ALL QUESTIONS CONCERNING WHETHER ANY PERSONS ARE ASSOCIATES OR A
GROUP ACTING IN CONCERT OR WHETHER ANY PURCHASE CONFLICTS WITH THE PURCHASE
LIMITATIONS IN THIS PLAN OR OTHERWISE VIOLATES ANY PROVISION OF THIS PLAN SHALL
BE DETERMINED BY THE COMPANY IN ITS SOLE DISCRETION. SUCH DETERMINATION SHALL BE
CONCLUSIVE, FINAL AND BINDING ON ALL PERSONS AND THE COMPANY MAY TAKE ANY
REMEDIAL ACTION, INCLUDING WITHOUT LIMITATION REJECTING THE PURCHASE OR
REFERRING THE MATTER TO THE DEPARTMENT FOR ACTION, AS IN ITS SOLE DISCRETION THE
BANK MAY DEEM APPROPRIATE.
11. Payment for Stock
All payments for Common Stock subscribed for or ordered in the Offering
must be delivered in full to the Bank, together with a properly completed and
executed order form, or purchase order in the case of the Syndicated Community
Offering, on or prior to the expiration date specified on the order form or
purchase order, as the case may be, unless such date is extended; provided, that
if Tax-Qualified Employee Plans subscribe for shares during the Subscription
Offering, such plans will not be required to pay for the shares at the time they
subscribe but rather may pay for such shares of Common Stock subscribed for by
such plans at the Actual Subscription Price upon consummation of the Offering,
provided that, in the case of the ESOP there is in force from the time of its
subscription until the consummation of the Offering, a loan commitment to lend
to the ESOP, at such time, the aggregated Actual Purchase Price of the shares
for which it subscribed. The Company or the Bank may make scheduled
discretionary contributions to a Tax-Qualified Employee Plan provided such
contributions from the Bank, if any, do not cause the Bank to fail to meet its
regulatory capital requirement.
Payment for Common Stock shall be made either by check or money order, or
if a purchaser has a Deposit Account in the Bank, such purchaser may pay for the
shares subscribed for by authorizing the Bank to make a withdrawal from
designated accounts at the Bank in an amount equal to the purchase price of such
shares. Such authorized withdrawal shall be without penalty as to premature
withdrawal. If the authorized withdrawal is from a certificate account, and the
remaining balance does not meet the applicable minimum balance requirements, the
certificate shall be
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canceled at the time of withdrawal, without penalty, and the remaining balance
will earn interest at the passbook rate. Funds for which a withdrawal is
authorized will remain in the purchaser's Deposit Account but may not be used by
the purchaser until the Common Stock has been sold or the 45-day period (or such
longer period as may be approved by the Department and, if necessary, the FRB)
following the Offering has expired, whichever occurs first. Thereafter, the
withdrawal will be given effect only to the extent necessary to satisfy the
subscription (to the extent it can be filled) at the Actual Purchase Price per
share. Interest will continue to be earned on any amounts authorized for
withdrawal until such withdrawal is given effect. Interest will be paid by the
Bank at a rate, not less than the Bank's passbook rate, established by the Bank
on payment for Common Stock received in money order or by check. Such interest
will be paid from the date payment is received by the Bank until consummation or
termination of the Offering. If for any reason the Offering is not consummated,
all payments made by subscribers in the Offering will be refunded to them with
interest. In case of amounts authorized for withdrawal from Deposit Accounts,
refunds will be made by canceling the authorization for withdrawal.
12. Manner of Exercising Subscription Rights Through Stock Order Forms
Except as otherwise set forth herein, after the prospectus prepared by the
Company and the Bank has been declared effective by the SEC, copies of the
prospectus and order forms will be distributed to all depositors with
subscription rights, at their last known addresses appearing on the records of
the Bank, and may be made available for use by persons permitted to purchase in
the Community Offering. A prospectus need not be provided to depositors to whom
the Company mailed materials permitting such depositor to return to the Company
by a reasonable date certain a postage paid card or other written communication
requesting receipt of the Prospectus if such depositor did not return such
postage paid card or otherwise request a copy of the Prospectus by the required
date.
Each order form will be preceded or accompanied by the prospectus
describing the Company, the Bank, the Common Stock and the Subscription and
Community Offerings. Each order form will contain, among other things, the
following:
A. A specified date by which all order forms must be received by the
Bank, which date shall be not less than 20, nor more than 45 days,
following the date on which the order forms are initially mailed to
depositors by the Bank, and which date will constitute the termination
of the Subscription Offering;
B. The number of shares of Common Stock to be sold in the Subscription
and Community Offerings;
C. A description of the minimum and maximum price per share of shares of
Common Stock that may be subscribed for pursuant to the exercise of
Subscription Rights or otherwise purchased in the Community Offering;
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D. Instructions as to how the recipient of the order form is to indicate
thereon the number of shares of Common Stock for which such Person
elects to subscribe and the available alternative methods of payment
therefor;
E. An acknowledgment that the recipient of the order form has received a
final copy of the prospectus prior to execution of the order form;
F. A statement indicating the consequences of failing to properly
complete and return the order form, including a statement to the
effect that all subscription rights are nontransferable, will be void
at the end of the Subscription Offering, and can only be exercised by
delivering to the Bank within the subscription period such properly
completed and executed order form, together with check or money order
in the full amount of the aggregate purchase price as specified in the
order form for the shares of Common Stock for which the recipient
elects to subscribe in the Subscription Offering (or by authorizing on
the order form that the Bank withdraw said amount from the
subscriber's Deposit Account at the Bank); and
G. A statement to the effect that the executed order form, once received
by the Bank, may not be modified or amended by the subscriber without
the consent of the Bank.
Notwithstanding the above, the Bank and the Company reserve the right in
their sole discretion to accept or reject orders received on photocopied or
facsimilied order forms.
13. Undelivered, Defective or Late Order Form; Insufficient Payment
In the event order forms (a) are not delivered and are returned to the Bank
by the United States Postal Service or the Bank is unable to locate the
addressee, (b) are not received back by the Bank or are received by the Bank
after the expiration date specified thereon, (c) are defectively filled out or
executed, (d) are not accompanied by the full required payment for the shares of
Common Stock subscribed for (including cases in which Deposit Accounts from
which withdrawals are authorized are insufficient to cover the amount of the
required payment), or (e) are not mailed pursuant to a "no mail" order placed in
effect by the account holder, the subscription rights of the Person to whom such
rights have been granted will lapse as though such Person failed to return the
order form within the time period specified thereon; provided, that the Bank
may, but will not be required to, waive any immaterial irregularity on any order
form or require the submission of corrected order forms or the remittance of
full payment for subscribed shares by such date as the Bank may specify. The
interpretation by the Bank of terms and conditions of this Plan and of the order
forms will be final, subject to the authority of the Department and, if
necessary, the FRB.
14. Completion of the Offering
The Offering will be terminated if not completed within 90 days from the
date of approval by the Department, unless an extension is approved by the
Department, and, if necessary, the FRB.
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15. Market for Common Stock
If at the close of the Offering the Company has more than 100 shareholders
of any class of stock, the Company shall use its best efforts to: (i) encourage
and assist a market maker to establish and maintain a market for that class of
stock; and (ii) list that class of stock on a national or regional securities
exchange, or on the Nasdaq system.
16. Stock Purchases by Management Persons After the Offering
For a period of three years after the proposed Offering, no Management
Person or his or her Associates may purchase or acquire direct or indirect
beneficial ownership, without the prior written approval of the Department, and,
if necessary, the FRB, any Common Stock of the Company, except from a broker-
dealer registered with the SEC. The foregoing shall not apply to purchases of
stock made by and held by any Tax-Qualified or Non-Tax Qualified Employee Plan
of the Bank or the Company even if such stock is attributable to Management
Persons or their Associates or to negotiated transactions involving more than 1%
of the shares of a class of stock.
17. Resales of Stock by Management Persons
Common Stock purchased by Management Persons and their associates in the
Offering may not be resold for a period of at least one year following the date
of purchase, except in the case of death of the Management Person.
18. Stock Certificates
Each stock certificate shall bear a legend giving appropriate notice of the
restrictions set forth in the preceding sections. Appropriate instructions shall
be issued to the Company's transfer agent with respect to applicable
restrictions on transfers of such stock. Any shares of stock issued as a stock
dividend, stock split or otherwise with respect to such restricted stock, shall
be subject to the same restrictions as apply to the restricted stock.
19. Restriction on Financing Stock Purchases
The Company will not knowingly offer or sell any of the Common Stock
proposed to be issued to any person whose purchase would be financed by funds
loaned to the person by the Company, the Bank or any of their Affiliates.
20. Stock Benefit Plans
The Board of Directors of the Bank and/or the Company intend to either (i)
adopt one or more stock benefit plans for their employees, officers and
directors, including an ESOP, stock award plans and stock option plans, which
will be authorized to purchase Common Stock and grant options for Common Stock,
or (ii) authorize existing plans to purchase additional shares of Common Stock
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and grant additional options for Common Stock. However, only the Tax-Qualified
Employee Plans will be permitted to purchase Common Stock in the Offering
subject to the purchase priorities set forth in this Plan. The Board of
Directors of the Bank intends to authorize the ESOP and any other Tax-Qualified
Employee Plans to purchase in the aggregate up to 10% of the Common Stock issued
in the Offering. The Bank or the Company may make scheduled discretionary
contributions to one or more Tax-Qualified Employee Plans to purchase Common
Stock issued in the Offering or to purchase issued and outstanding shares of
Common Stock or authorized but unissued shares of Common Stock subsequent to the
completion of the Offering, provided such contributions do not cause the Bank to
fail to meet any of its regulatory capital requirements. This Plan specifically
authorizes the grant and issuance by the Company of (i) awards of Common Stock
after the Offering pursuant to one or more stock recognition and award plans
(the "Recognition Plans") in an amount equal to up to 4% of the number of shares
of Common Stock issued in the Offering, (ii) options to purchase a number of
shares of Common Stock in an amount equal to up to 10% of the number of shares
of Common Stock issued in the Offering and shares of Common Stock issuable upon
exercise of such options, and (iii) Common Stock to one or more Tax Qualified
Employee Plans, including the ESOP, at the closing of the Offering or at any
time thereafter, in an amount equal to up to 10% of the number of shares of
Common Stock issued in the Offering. Shares awarded to the Tax Qualified
Employee Plans or pursuant to the Recognition Plans, and shares issued upon
exercise of options may be authorized but unissued shares of the Company's
Common Stock, or shares of Common Stock purchased by the Company or such plans
on the open market. Any new Recognition Plans and new stock option plans will be
subject to prior stockholder approval.
21. Post-Reorganization Filing and Market Making
The Common Stock is registered with the SEC pursuant to the Exchange Act,
and the Company shall undertake not to deregister such Common Stock for a period
of three years after the Offering.
22. Payment of Dividends and Repurchase of Stock
The Company may not declare or pay a cash dividend on, or repurchase any
of, its Common Stock if the effect thereof would cause its regulatory capital or
the regulatory capital of the Bank to be reduced below the amount required under
FDIC or FRB rules and regulations. Otherwise, the Company may declare dividends
or make other capital distributions in accordance with applicable laws and
regulations. Following completion of the Offering, the Company may repurchase
its Common Stock from time to time as permitted by the Department.
23. Interpretation
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Company
shall be final, subject to the authority of the Department.
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24. Amendment or Termination of the Plan
If necessary or desirable, the terms of the Plan may be amended by a
majority vote of the Company's Board of Directors as a result of comments from
regulatory authorities or otherwise at any time prior to the approval of the
Plan by the Department and at any time thereafter with the concurrence of the
Department. The Plan may be terminated by a majority vote of the Board of
Directors at any time prior to the approval of the Plan by the Department, and
may be terminated by a majority vote of the Board of Directors at any time
thereafter with the concurrence of the Department and, if necessary, the FRB.
Dated: June 16, 1998
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Exhibit 5.1
(202) 274-2009
June 30, 1998
Board of Directors
Harris Financial, Inc.
235 North Second Street
Harrisburg, Pennsylvania 17101
Re: Harris Financial, Inc.
Common Stock Par Value $.01 Per Share
-------------------------------------
Ladies and Gentlemen:
You have requested the opinion of this firm as to certain matters in
connection with the offer and sale (the "Offering") of Harris Financial, Inc.
(the "Company") Common Stock, par value $.01 per share (the "Common Stock"). We
have reviewed the Company's Articles of Incorporation, Registration Statement on
Form S-3 (the "Form S-3"), as well as applicable statutes and regulations
governing the Company and the offer and sale of the Common Stock.
We are of the opinion that upon the declaration of effectiveness of the
Form S-3, the Common Stock, when sold, will be legally issued, fully paid and
non-assessable.
This Opinion has been prepared for the use of the Company in connection
with the Form S-3. We hereby consent to our firm being referenced under the
caption "Legal and Tax Matters."
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick
----------------------------------------
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
<PAGE>
Exhibit 23.1
KPMG Peat Marwick LLP
225 Market Street
Suite 300
P.O. Box 1190
Harrisburg, PA 17108-1190
The Board of Directors
Harris Financial, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick
June 30, 1998
<PAGE>
Exhibit 23.3
Arthur Andersen LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 20, 1998,
incorporated by reference in Harris Financial Inc.'s Form 10-K for the year
ended December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Lancaster, Pennsylvania
June 30, 1998
